The Chinese Commerce Ministry and Foreign Ministry jointly declared their intent to implement further measures in response to perceived US coercion. The statement reaffirmed China’s commitment to resolute countermeasures aimed at safeguarding its national interests, emphasizing that trade wars are detrimental to all parties involved. While China maintains its aversion to engaging in tariff or trade conflicts, it will not hesitate to defend its rights and interests.
Market reaction to these comments saw AUD/USD pare gains, trading at 0.6170, up 0.24% at the time of reporting.
A trade war is generally defined as an economic dispute between nations characterized by protectionist policies. This involves the imposition of trade barriers, such as tariffs, leading to reciprocal measures, increased import costs, and a subsequent rise in the cost of living.
The US-China trade war, initiated in early 2018 by then-President Donald Trump, stemmed from allegations of unfair trade practices and intellectual property theft. China responded with retaliatory tariffs on US goods. The “Phase One” trade deal, signed in January 2020, aimed to restore stability through structural reforms. However, the COVID-19 pandemic shifted focus. President Joe Biden maintained existing tariffs and introduced additional levies.
The potential return of Donald Trump to the presidency has reignited tensions. His campaign pledge to impose 60% tariffs on China upon assuming office on January 20, 2025, suggests a resumption of the trade war. Such policies could disrupt global supply chains, reduce investment, and contribute to inflationary pressures.
