U.S.Trade Warโฃ Flare-Up Sends โChina Stocks Tumbling
SHANGHAI, May 17 – Chinese stocks experienced a sharp sell-off Friday, erasing earlier gains for โthe year, as the biden management announced meaningful โincreases to tariffs on Chinese goods, reviving fears of โa full-blown trade war. The CSI 300 Index closed down 3.66%,โค marking its largest single-day dropโข in over a year, while the Shanghai Composite Index โfell 2.6%.
The escalation, targeting strategicโค sectors like electric vehicles, solar products, and semiconductors, represents a considerableโฃ shift in U.S. โtrade policy towards China. The move โimpacts billions of dollars in trade โand threatens to further strain the world’s โtwo largest economies, possibly disrupting global supplyโค chains and raising costs for consumers. This renewed trade tension arrives at a sensitive time for China, which has been attempting to bolster its economic recovery following โthe lifting of COVID-19 restrictions, and for the U.S.,as it heads โinto a presidential election year.
The U.S. Trade Representative announced tariffs will rise to 100% on electric vehicles, 50% on solar cells, and 25% on semiconductors, citing concerns over china’s industrial policies and alleged unfair trade practices. โ “For years,China has pursued an economic strategy built on unfair practices – โincluding dumping,subsidies,and theft โขof intellectual property – that harms Americanโฃ workers and businesses,” U.S. Trade Representative Katherine Tai statedโข in a press briefing. “This action will prevent China from overwhelming the U.S. market with artificially cheap products.”
China’s Ministry โฃof Commerce swiftly condemned the tariffs, calling them a “violation of international economic and trade rules” and vowing to take “strong measures to defendโฃ its rights.” โคA ministry spokesperson stated that the U.S. actions “disrupt global industrial and supply chains” andโค “are not conducive to the economic recovery of โฃthe world.”
The impactโค was promptly โคfeltโฃ across Chinese markets. Shares of EV manufacturers like BYD and Nio plummeted, while solar panel producers alsoโ saw significant declines.analysts predict further volatility in the comingโ days as investors assess the long-term implications ofโค the tariff hikes.
“This isโ aโค significant escalation that throws a wrench โคinto the narrative of a stabilizing China-U.S. relationship,” saeid Alicia garcia Herrero, Chief Economist for Asiaโฃ Pacific at Natixis. “The tariffs will undoubtedly hurt Chinese exports, but the bigger risk is โฃthe potential โfor further retaliation and a broader decoupling of the two economies.”
The โU.S. has framed โthe tariffs as a response to China’s overcapacity in key sectors, arguing that state subsidies are enablingโข Chinese companies to flood the global market with artificially low-priced goods.โข The Biden administration also cited national securityโ concerns โrelated to the semiconductor industry. โThe tariffs are set to be phased in over the next several years, giving companies time to adjust, but the long-term outlook remains uncertain.