China Hits Back: Trade War with U.S. Escalates Amid Rare Earths and Tariff Battle

Watan-On Friday, China announced it has filed a complaint with the World Trade Organization (WTO) over tariffs imposed by the United States on its exports. In a statement, China’s Ministry of Commerce said, “China has filed a complaint under the WTO’s dispute settlement mechanism.”

At the same time, Chinese customs authorities announced retaliatory tariffs of 34% on U.S. imports starting April 10. Additionally, Beijing imposed controls on the export of medium and heavy rare earth metals to the U.S. beginning April 4.

This move is considered a strike at a “pain point” for the U.S., as these materials are essential for semiconductor production and artificial intelligence technologies. China holds the largest share of these minerals globally, threatening to further disrupt a sensitive sector in the U.S.—a sector heavily promoted by Donald Trump, but already shaken by fierce Chinese competition.

China’s Ministry of Commerce stated:“The purpose of imposing export controls is to better safeguard national security and interests, in accordance with the law and international obligations.” Beijing also added 11 entities to its “unreliable entity list,” allowing for punitive measures against foreign companies.

These steps were taken in response to Trump’s recent announcement of 34% tariffs on Chinese goods, part of a wider trade tariff initiative against multiple global partners.

With the new measures, total U.S. tariffs on Chinese imports have surged to 54%, up from a previous 20%. Beijing denounced the U.S. decision, calling the tariffs “unilateral and self-serving” and a violation of international trade rules.

Reacting to China’s move, Trump claimed Beijing had “panicked,” writing on his Truth Social platform:
“China messed up. They panicked. It’s the one thing they can’t afford!”

Oil prices dropped sharply on Friday following China’s announcements. Brent crude for June delivery fell 4.99% to $66.64 per barrel, hitting its lowest level since December 2021. West Texas Intermediate dropped 5.23% to $63.45 per barrel.

European stock markets also suffered steep losses on Friday due to the escalating trade confrontation between the world’s two largest economies:

• Frankfurt: –4.46%

• Paris: –3.83%

• London: –3.48%

• Milan: –7.18%

• Madrid: –5.66%

Global financial markets continued to bleed, as traders reacted to the U.S. tariffs targeting both rivals and allies. Tokyo’s Nikkei closed down 2.75%, Topix fell 3.37%, Sydney dropped 2.44%, and Seoul 0.86%. Chinese markets were closed due to a national holiday.

Analysts from Tokai Tokyo Securities noted:“Uncertainty is greater than ever, given how financial markets are responding to Trump’s measures.”

Japanese Prime Minister Shigeru Ishiba addressed parliament Friday, calling the 24% tariffs on Japan a “national crisis.” Last year, 20% of Japan’s exports went to the U.S.

Meanwhile, key U.S. trading partners began taking countermeasures. Trump dismissed global concerns, telling reporters aboard Air Force One:“The economy was sick… Now it will recover.”

IMF Director Kristalina Georgieva warned Thursday that Trump’s tariffs pose a major threat to the global economy:“It’s crucial to avoid measures that could further harm global growth,” she said, noting that the macroeconomic impact of the tariffs is still being assessed.

Wall Street also plunged, with the Nasdaq falling 5.97%, and the S&P 500 registering its worst loss since 2020, down 4.84%.

Oil prices hit their lowest since 2021, exacerbated by OPEC+’s surprise decision to increase output. Gold surged to new record highs as investors sought safe havens.

This latest wave of tariffs follows earlier rounds targeting steel and aluminum (25%) and, since Thursday, imported vehicles (25%).

Vice President J.D. Vance said in a Thursday TV interview:“The situation in the markets might actually get worse. It’s a massive shift.”

Macron’s Response and Global Backlash

Following Trump’s announcement, U.S. allies avoided immediate escalation, mindful of the global economic consequences. The White House left the door open for negotiations but warned that any retaliation could trigger further sanctions.

French President Emmanuel Macron outlined a gradual EU response, including a temporary halt to investments in the U.S. France’s Economy Minister Eric Lombard urged companies to act patriotically, saying:
“If a major French firm opens a plant in the U.S. now, it’s a win for them.”

Italian PM Giorgia Meloni emphasized the need to reduce, not increase, tariffs, while Canada announced 25% retaliatory tariffs on select U.S. cars.

Production Shutdowns Begin

The White House’s protectionist agenda, unprecedented since the 1930s, includes a minimum 10% general import tariff, with higher rates for countries seen as adversarial.

• The 10% general tariff takes effect April 5 at 04:01 GMT.

• Higher tariffs follow on April 9.

This is a huge blow to China, with a 34% import tax now on its goods, adding to the earlier 20%. Other new tariffs include:

• EU goods: 20%

• Japan: 24%

• India: 26%

• Vietnam: 46%

WTO Director-General Ngozi Okonjo-Iweala warned that Trump’s tariffs since January could shrink global trade by 1% this year.

The first major casualty hit Thursday as Stellantis announced a two-week shutdown of its Chrysler plant in Windsor, Canada.