China Seeks Last-Minute Deal to Avoid US Trade War

06 Feb, 2025

China’s new tariffs on U.S. imports, including oil, coal, and cars, remain relatively modest, signaling hopes for a last-minute trade deal. However, analysts suggest that Beijing retains the option to escalate its response if necessary. The latest countermeasures impact around $20 billion worth of U.S. goods annually, covering energy imports and agricultural machinery.

A significant portion of these tariffs targets the energy sector, with crude oil, coal, and LNG making up over $7 billion in imports last year. Additionally, China has imposed export controls on rare metals like tungsten, tellurium, and bismuth, which are crucial in various industries, from mining to electronics. Given China’s dominance in rare metal supply chains, these restrictions could disrupt global markets.

The restrained nature of China’s countermeasures suggests a strategic approach. Analysts believe Beijing aims to send a message to Washington while minimizing domestic economic damage. With China’s economy already facing challenges, experts argue that excessive trade barriers could further strain growth. Instead of drastic moves, China appears to be positioning itself for prolonged negotiations.

Despite the limited scope of the tariffs, China has the ability to inflict significant economic damage if tensions escalate. The U.S. relies on China for critical minerals essential for electric vehicles and semiconductors. Past restrictions on metals like gallium and germanium have already demonstrated Beijing’s leverage. Yet, the decision to hold back on harsher measures hints at a willingness to keep negotiations open.

U.S. President Donald Trump’s stance remains uncertain. While he initially suggested a potential call with Chinese President Xi Jinping, he later walked back the statement. As China waits for a response, analysts believe Beijing hopes to strike a deal similar to those secured by Mexico and Canada, possibly tied to commitments on fentanyl control and TikTok ownership.

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