^{Source: CNBC}

In response to the U.S. administration's recent increase in tariffs on Chinese goods, China has announced a series of countermeasures, shifting its focus from goods to the U.S. services sector. This strategic pivot aims to leverage areas where the U.S. maintains a trade surplus, signaling a new phase in the ongoing trade tensions between the two nations.​

China's Strategic Response

While the U.S. has imposed tariffs of up to 245% on Chinese imports, China has retaliated with its own tariffs of up to 125% on U.S. goods. However, China's recent actions indicate a broader strategy:​

• Services Sector Targeted: China is now focusing on the U.S. services sector, which includes travel, legal, consulting, and financial services. This sector has been a significant contributor to the U.S. trade surplus with China, with U.S. services exports to China reaching $55 billion in 2024, resulting in a $32 billion surplus.​
• Non-Tariff Measures: Beijing has implemented non-tariff measures such as export controls on rare-earth minerals and antitrust investigations into U.S. companies like DuPont and Google. ​
• Unreliable Entity List: In February, China added several U.S. companies to its "unreliable entity" list, restricting their operations within China. Companies affected include PVH Corp., the parent company of Tommy Hilfiger, and Illumina, a gene-sequencing equipment provider.​

Impact on U.S. Industries

China's measures are expected to have significant implications for various U.S. industries:

• Aviation: China has ordered its airlines to halt purchases of aircraft and related equipment from U.S. companies, directly impacting Boeing, America's largest exporter. ​
• Education and Tourism: China has advised its citizens against traveling or studying in the U.S., affecting the education sector, which heavily relies on international students. In 2024, over 270,000 Chinese students studied in the U.S., contributing significantly to the economy through tuition and living expenses.​
• Entertainment: China has reduced imports of U.S. films, impacting Hollywood and the broader entertainment industry.​

Expert Insights

Wendy Cutler, vice president at the Asia Society Policy Institute, stated, "Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull, all creating different levels of pain for U.S. companies."​

Jing Qian, managing director at the Center for China Analysis, noted that while the immediate financial impact might be limited, the reputational effects could ripple through academia and the tech talent ecosystem.​

Future Outlook

Analysts anticipate that China will continue to utilize non-tariff policy tools to increase its leverage in any potential negotiations with the U.S. Companies such as Apple, Tesla, and various pharmaceutical and medical device firms could be targeted as Beijing intensifies its measures.​

While both nations have expressed a willingness to negotiate, the path to resolution remains uncertain. Chinese officials have emphasized the need for the U.S. to cease its threats and blackmailing tactics, suggesting that meaningful negotiations can only occur on equal footing.

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