The trade fight between the U.S. and China got worse on Tuesday, with China hitting back after the U.S. raised tariffs. China increased taxes on $21 billion worth of American farm and food products, bringing the world’s two biggest economies closer to a full-blown trade war.
Reuters reported that China also placed restrictions on 25 American companies, saying it was for national security reasons. However, this time, China did not target any well-known brands, unlike when it responded to U.S. tariffs earlier in February.
A spokesperson from China’s foreign ministry said at a press conference that trying to pressure China was a mistake. Reuters noted that China insists it will not give in to bullying.
The latest move came after U.S. President Donald Trump’s new 10% tariff on Chinese products took effect early Tuesday. This brings the total tariff to 20% because of what the White House claims is China’s failure to stop drug trafficking.
China called the U.S. move “blackmail,” saying it already has strict drug control policies. Reuters pointed out that China is trying to leave room for negotiation, as its tariffs are lower than 20%.
However, experts warn that every new penalty makes it harder for both sides to reach a deal. An agriculture analyst, Even Pay, told Reuters that while China does not want to escalate the fight, the situation is starting to feel like “Trade War 2.0.”
There is still a chance for China and the U.S. to reach an agreement if Trump and Chinese President Xi Jinping work something out.
On Tuesday, China also started investigating some U.S. companies for allegedly avoiding anti-dumping rules, blocked imports from three American businesses, and stopped shipments of U.S. lumber. These moves are likely to add more pressure to trade between the two countries.
The U.S. tariffs mainly target Chinese electronics like smartphones, laptops, gaming consoles, and Bluetooth devices, which had previously avoided high taxes.
Meanwhile, Reuters noted that China hit back by raising tariffs by 15% on American chicken, wheat, corn, and cotton. U.S. pork, beef, soybeans, and other food products will also face an extra 10% tax starting March 10. China’s latest tariffs will affect about 15% of American exports to the country, which is worth $21 billion.
China also put 15 American companies on an export control list, which stops Chinese businesses from selling them certain technologies. Additionally, 10 U.S. firms were added to China’s “Unreliable Entity List” for selling weapons to Taiwan, which China considers part of its territory.
Reuters reported that these actions reflect Beijing’s ongoing frustration over U.S. arms sales to the island.
Cameron Johnson, a supply chain expert, told Reuters that Trump has threatened to raise tariffs to 60%, but right now, the 20% rate is not enough to push companies to move their supply chains away from China. However, if tariffs hit 35%, businesses may start looking for other options.
The agricultural industry has been one of the biggest victims of these trade fights. China is the largest buyer of American farm products, but purchases have dropped in recent years. According to Reuters, China’s imports of U.S. farm goods fell from $42.8 billion in 2022 to $29.25 billion in 2024.
Surprisingly, China’s stock markets did not panic. Reuters said futures prices for key animal feed ingredients like soymeal and rapeseed meal went up slightly after news broke that China might target U.S. farm goods.
The U.S.-China trade fight is not just about money—it also affects inflation in the U.S. and China’s efforts to recover economically after COVID-19. The U.S.-China Business Council (USCBC) said it supports Trump’s goal of stopping illegal drug trade but warned that raising tariffs is not the solution. Reuters quoted USCBC President Sean Stein saying that across-the-board tariffs will hurt American businesses, farmers, and consumers.
However, other countries could benefit from this trade fight. Reuters explained that China has already reduced its dependence on U.S. farm goods by buying more from countries like Brazil. At the same time, American agricultural exporters may shift their focus to markets in Southeast Asia, Africa, and India.
An analyst from Commonwealth Bank in Sydney told Reuters that China’s move to tax American wheat and corn could be good news for Australian wheat exporters. But since China has already slowed down its grain imports from all countries, the impact may not be as big as some hope.
The bottom line is that both the U.S. and China are pushing forward with new trade penalties, but the door for negotiation is still open.
However, as Reuters highlighted, if things keep escalating, both countries could suffer serious economic damage.
Credit : Reuters