China calls US tariffs ‘madness’ and warns of a major trade conflict

(Clipart Korea)

China has stepped up its opposition to the US government’s plan to substantially increase tariffs on Chinese products. With the country having already revised its tariff law to retaliate against countries imposing high tariffs on Chinese goods, it is highly likely that the tariff dispute between the US and China will escalate further.

Chinese Foreign Minister Wang Yi said at a press conference on Wednesday after talks with his Pakistani counterpart: “In recent weeks and months, the United States has repeatedly imposed unilateral sanctions, abused the Section 301 tariff review process and launched a campaign against normal trade -, China’s economic and technological activities bordering on madness.” Wang continued by saying that the US actions are “a typical case of hegemonism and bullying” and that “some in the United States have lost their minds in a quest to to ensure US unipolar supremacy.”

These comments are significantly stronger than China’s previous statements immediately after announcing the tariff increases. At a regular briefing on Tuesday, Foreign Ministry spokesman Wang Wenbin said: “China opposes unilateral tariffs that violate WTO (World Trade Organization) rules and will take all measures necessary to safeguard our legitimate rights and defend interests.”

The US action that has sparked China’s backlash includes invoking Section 301 of the Commerce Act to sharply increase tariffs on Chinese goods such as electric vehicles (EVs), EV batteries and semiconductors. Section 301 allows the U.S. government to retaliate when U.S. companies suffer from unfair trade practices of other countries. Under the new US plan, tariffs on Chinese electric cars will increase from 25% to 100%, those on lithium-ion EV batteries from 7.5% to 25%, and those on semiconductors from 25% to 50%. Solar panels are also among the items for which higher rates apply. This aggressive tariff policy is effectively intended to limit the access of key Chinese products to the US market.

It is very likely that China will retaliate with its own tariffs. Last month, the Standing Committee of the National People’s Congress revised China’s Tariff Law (Article 17) to allow equivalent tariffs on goods from countries that have trade agreements with China but impose high tariffs on Chinese products. The amendment, which comes into effect in December, effectively provides China with the institutional framework to counter the US tariff offensive.

China could also adopt other forms of retaliation. Given the close interconnectedness between the US and China across all sectors of goods and services, disrupting these connections could cause significant damage to the US. For example, China could sell its US government bonds in large quantities, potentially disrupting not only US but also global financial markets. Previously, in 2018, when the US Trump administration imposed additional tariffs on certain Chinese products, China responded with a WTO complaint and retaliatory tariffs.

Trade tensions between the US and China are likely to escalate rather than be resolved in the near term. Professor Park Bok-yeong of Kyung Hee University noted: “Although the Biden administration’s Inflation Reduction Act aimed to secure domestic supply chains, the tariff increases are intended to stem the inflow of Chinese high-tech (industrial products) to go.”

Initially, the Biden administration focused on stabilizing supply chains and securing industrial competitiveness amid COVID-19-induced shortages. However, current measures are aimed at curbing China’s rise in high-tech industries to protect US economic security, with China taking countermeasures in response. In other words, the nature of the conflict between the US and China is evolving and deepening.

This situation complicates strategic calculations for South Korea, with its export-driven economy. There are expectations that Korean companies could benefit from the difficulties that Chinese products such as electric cars will face in entering the US market. However, the EV battery components industry, which relies on Chinese raw materials, will have to adapt its supply chains.

Experts emphasize the importance of looking beyond short-term gains and losses to understand the broader implications of shifts in the global trade structure and formulate comprehensive strategic responses. Park Sang-hyun, a researcher at Hi Investment & Securities, noted: “It is important to note the (growing trend of policies aimed at) protecting and nurturing domestic production. There is a good chance that regulations for Korean products will also be tightened.”

Park added: “There is an urgent need to implement a trade policy that reflects the new trade environment and goes beyond the traditional Korean-American diplomatic strategy.”

By Jun Seul-gi, staff reporter

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