Marketplace Morning Report: China Hits Back with Its Own Tariffs Release Date: February 4, 2025

Introduction

In the latest episode of the Marketplace Morning Report, host Liana Byrne delves into the escalating trade tensions between the United States and China. This comprehensive analysis explores China's retaliatory measures in response to the Trump administration's tariff imposition, the broader economic implications, expert insights, and the impact on global markets.

China's Retaliatory Tariffs

Following President Trump's decision to impose a fresh 10% levy on U.S. exports, China swiftly responded with its own set of tariffs targeting American goods. Liana Byrne outlines the specifics of these measures:

Liana Byrne [00:48]: "China was never going to take this lying down after President Trump slapped a fresh 10% levy on exports to the U.S."

Laura Bicker, BBC's correspondent in Beijing, provides detailed information on the scope of China's retaliation:

Laura Bicker [01:44]: "Now they have come out and issued this levy, 15% on U.S. imports of coal and liquefied natural gas and 10% on the likes of agricultural machinery and large U.S. cars and trucks. To me, when you're looking at it, they're not big purchasers of these products in terms of certainly large agricultural machinery and large trucks and cars. Chinese people tend to buy their own electric vehicles here in the country."

These tariffs signify China's unwillingness to be passive in the face of U.S. trade policies, indicating a potential onset of a tit-for-tat trade war.

Expert Insights: Perspectives from China

To understand the broader implications of these tariffs, Marketplace brings in Henry Wang, founder and president of the Center for China and Globalization and a former adviser to China's State Council:

Henry Wang [02:37]: "Certainly they have to respond, and. But I think the response was really restricted and limited. It was really just on some categories and also certain companies. So I think there's still chance. You know, President Trump also said he wants to talk to the Chinese leaders. So I would expect in the next few days, you know, there could be more talks. So I'm really thinking, you know, U.S. has imposed that China would have to respond, but that's not the end. You know, that's really paved the way for talks, for the discussion, for the communication. I think China still hopes that this can be discussed and negotiated."

Wang emphasizes that while China's response is firm, it remains open to dialogue, suggesting that further negotiations between the U.S. and China are forthcoming.

Market Reactions and Economic Impacts

Despite the heightened trade tensions, Chinese markets have exhibited resilience. Byrne highlights the positive movement in Chinese stocks:

Liana Byrne [03:10]: "Surprisingly, Chinese stocks listed in Hong Kong closed up almost 3% as investors jumped on AI and EV shares. Many are placing their bets on homegrown tech like chipmaker SMIC, which soared 8.5%, a record high."

This uptick reflects investor confidence in China's burgeoning technology sectors, particularly in artificial intelligence and electric vehicles.

Impact on Specific Industries

The beverage giant Diageo experiences temporary reprieve from the new tariffs:

Liana Byrne [03:10]: "Canada and Mexico are off the tariffs hook for now. And it's a temporary relief for Diageo, which makes tequila and Canadian whiskey. In a statement, the drinks giant says that nearly half of its US Sales come from products made in Mexico and, and Canada. And if 25% tariffs come in, it'll cost it almost $250 million."

This development provides a brief respite for companies like Diageo, which rely heavily on exports from Mexico and Canada.

Belt and Road Initiative: Panama Withdraws

A significant development in the geopolitical landscape is Panama's withdrawal from China's ambitious Belt and Road Initiative. Byrne reports on the implications of this move:

Liana Byrne [03:10]: "Panama has pulled out of the massive global infrastructure project, China's Belt and Road Initiative, after talks with the US Secretary of State, Marco Rubio, who's been visiting the country."

Tom Bateman, BBC's reporter in Panama City, offers an on-the-ground perspective:

Tom Bateman [04:20]: "Donald's Trump sudden policy pronouncement has hit Panama like the bulk carriers that blast their way up the canal. We're on the locks of the Pacific side entrance, hearing from workers where Mr. Trump has claimed the canal is being run by China."

The U.S. administration accuses China of exerting undue influence over the strategically vital Panama Canal, leading to increased tensions.

Local Reactions and Diplomatic Tensions

The local Panamanian community reacts strongly to U.S. assertions and policy changes. Henry Wang provides further context:

Henry Wang [06:17]: "We're insulted. Totally insulted. Because we put up with the American president for 100 years. Every penny that came out of the canal went to the United States. We got pittance. No more American in the middle of Panama. Absolutely not."

This sentiment underscores the deep-rooted historical grievances and national pride influencing Panama's stance against perceived Chinese dominance.

Conclusion and Forward Look

As trade tensions between the U.S. and China intensify, the global economic and geopolitical landscape remains uncertain. With President Trump scheduled to speak with China's President Xi Jinping later in the week, stakeholders worldwide are keenly watching for any signs of de-escalation or further confrontation.

Liana Byrne wraps up the report, emphasizing the ongoing developments and their significance for international trade and relations.

Liana Byrne [06:57]: "Have a great day and as ever, thanks so much for listening."

Key Takeaways

• China's Retaliation: In response to U.S. tariffs, China imposed new levies on specific American exports and scrutinized certain U.S. companies.

• Expert Perspective: Henry Wang suggests that while China's response is significant, there remains an opportunity for dialogue and negotiation.

• Market Resilience: Chinese markets showed robust performance, particularly in technology sectors, despite trade tensions.

• Industry Specifics: Companies like Diageo benefit from temporary relief against new tariffs, highlighting the varied impact across industries.

• Geopolitical Shifts: Panama's withdrawal from the Belt and Road Initiative marks a pivotal moment in U.S.-China relations and regional power dynamics.

• Future Outlook: Upcoming talks between U.S. and Chinese leaders are crucial in determining the trajectory of this trade conflict.

Notable Quotes

• Liana Byrne [00:48]: "China was never going to take this lying down after President Trump slapped a fresh 10% levy on exports to the U.S."

• Laura Bicker [01:44]: "This is them hitting back. This is them deciding here in China that this could spark a tit for tat trade war."

• Henry Wang [02:37]: "I think China still hopes that this can be discussed and negotiated."

• Tom Bateman [04:20]: "Donald Trump's sudden policy pronouncement has hit Panama like the bulk carriers that blast their way up the canal."

• Henry Wang [06:17]: "We're insulted. Totally insulted."

For more detailed insights and updates, tune into the latest episodes of the Marketplace Morning Report.