China sticks to its guns as fresh US tariff threat pushes tension to the brink

Highlights:

• China vows 'fight to the end' if US hikes tariffs further
• Trump threatens China with additional 50% duty
• Tariffs make for battle of wills, not economics, analyst says

China vowed on Tuesday to "fight to the end" against US tariffs as some citizens railed against President Donald Trump after he singled out Beijing for further levies, setting the stage for a standoff between the world's two largest economies.

If Trump sticks to his plan for an additional 50% tariff on China unless it withdraws its retaliatory levies on the US, total new US duties on Chinese goods this year could rise to 104% by Wednesday.

With global supply chains in jeopardy, Beijing is under pressure to respond ahead of a meeting between President Xi Jinping and Spain's prime minister and a tour of Southeast Asia.

But with Trump's previous tariff increases already squeezing Chinese exporters' margins to the point of suffocation, further hikes would only serve to underscore Washington's appetite for brinkmanship and its desire to cut China out of the world's biggest consumer market as a matter of principle, analysts say.

"The US side's threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side's blackmailing nature," the commerce ministry said in a statement.

"If the US insists on having its way, China will fight to the end."

Trump said he would impose the additional 50% duty on US imports from China on Wednesday if Beijing did not withdraw the 34% tariffs it had imposed on US products last week.

The Chinese levies had come in response to 34% "reciprocal" duties announced by Trump, on top of tariffs of 20% imposed earlier this year, lifting to 76% the average US tariff on Chinese goods.

"If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics," said Xu Tianchen, senior economist for China at the Economist Intelligence Unit.

"Since China already faces a tariff rate in excess of 60%, it doesn't matter if it goes up by 50% or 500%," he added.

China has stepped up efforts to shield its economy from global market turmoil following Trump's announcement.

Several state holding companies have committed to increase share investment, a slew of listed companies unveiled buybacks, and the central bank pledged liquidity support for fund Central Huijin after it intervened to support sinking stocks.

But there is no escaping the fact that Trump's affinity for tariffs risks derailing China's largely export-led economic recovery that followed the end of the COVID-19 pandemic, unless exporters can pivot quickly to other markets.

TARGETING CHINA

Trump's tariffs will be felt particularly keenly as they target the two main strategies Chinese exporters have used to blunt the impact of the trade war: shifting some production abroad and boosting sales to non-US markets.

Ordinary people have also started to voice opposition, accusing the tariff-touting president of wanting to suppress the United States' rival.

"The tariffs on China were set too high, too high, and ordinary Chinese people just can't accept that," said Qi Xiushun, a 58-year-old resident of the commercial hub of Shanghai.

"(The tariffs) are suppressing China's economic development - these tariffs were mainly pushed by Trump, right?"

Dan Wang, a China expert at Eurasia Group, said Trump had effectively already wiped out Chinese exporters' profits once US import duties passed the 35% mark.

"After that, China shouldn't export to the US at all. It could be 1,000%, but since there is no trade, there is no harm."

"Europe is and will be the most profitable market for China now," she added.

Xi is expected to meet Spain's Prime Minister Pedro Sanchez on Friday, with the agenda likely to cover finding a resolution to trade tension with Brussels over China's electric vehicle exports, as well as Trump's broader tariff onslaught.

The Chinese leader will then visit Malaysia, Vietnam and Cambodia, three economies that gained from relocation by Chinese manufacturers to avoid US sanctions during Trump's first term, but which now face steep levies of their own.

"I think (Trump's) targeting us, targeting China," said Wu Xing, a 34-year-old sales person, also from Shanghai, adding that she expected the tariffs would have a big impact on her.

"As for the United States, I think it's targeting the whole world."