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In response to recent U.S. tariff hikes, China is intensifying its trade retaliation by targeting the American services sector and implementing non-tariff measures. This strategic pivot aims to exert pressure on the U.S. economy by focusing on areas where the U.S. holds a trade surplus, such as legal, consulting, and financial services.​

China's Strategic Shift to Services

Historically, the U.S. has maintained a significant trade surplus in services with China, amounting to $32 billion in 2024. Recognizing this, Beijing is now focusing its retaliatory measures on this sector. Actions include imposing restrictions on U.S. legal consultancy firms and initiating probes into American companies operating in China for alleged monopolistic practices.​

Non-Tariff Measures and Export Controls

Beyond services, China is employing non-tariff strategies to counter U.S. tariffs:​

• Export Controls: China has tightened export controls on rare-earth minerals, essential for manufacturing semiconductors, missile-defense systems, and solar cells. Chinese companies now require special licenses to export these resources, potentially disrupting U.S. supply chains.​
• Antitrust Investigations: Beijing has launched antitrust probes into major U.S. corporations, including pharmaceutical giant DuPont and tech leader Google, scrutinizing their market practices within China.​
• Unreliable Entity List: In February, China added several U.S. firms, such as PVH Corp. (parent company of Tommy Hilfiger) and Illumina, to its "unreliable entity" list, restricting their business operations and investments in China.​

Impact on Key U.S. Industries

• Aviation: China has instructed its airlines to halt further deliveries of Boeing jets and suspend purchases of aircraft-related equipment and parts from U.S. companies. This move significantly affects Boeing, America's largest exporter, already grappling with quality-control issues.​
• Entertainment and Education: China announced plans to reduce imports of U.S. films and cautioned its citizens against traveling or studying in the U.S. This could impact the U.S. entertainment industry and educational institutions, which benefit from Chinese students' tuition and living expenses.​

Economic Implications and Future Outlook

Analysts suggest that China's approach aims to maximize economic pressure on the U.S. without escalating tariff exchanges. By targeting sectors where the U.S. has a competitive advantage, China seeks to create leverage in potential future negotiations.​

Wendy Cutler, Vice President at the Asia Society Policy Institute, noted, "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."​

As the trade conflict evolves, both nations face the challenge of balancing economic interests with strategic objectives. The global community watches closely, aware that prolonged tensions could have far-reaching implications for international trade and economic stability.

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