Donald Trump fired an opening shot in his tariff battle with Beijing by promising an additional 10 per cent levy on Chinese goods. The question that now confronts President Xi Jinping is how much more is coming.
The threat by the US president-elect, made on his Truth Social network on Monday, was in retribution for what he said was China's failure to stop "drugs pouring into our Country, mostly through Mexico." It wasn't clear from the post whether the 10 per cent tariff level was an additional levy to an earlier warning of 60 per cent or represented a climbdown.
"This is an early test of Xi's willingness to play ball with the new Trump administration," said Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute's Center for China Analysis. "Agreeing to Trump's demands could avoid a painful tariff, but might encourage him to impose more tariffs to try and extract more concessions."
Trump's gambit risks setting in motion a standoff between the world's two biggest economies following an election campaign that already brought fears over a new wave of protectionism to the forefront. In related posts, Trump said he'd slap 25 per cent tariffs on all products from Mexico and Canada, citing concerns over illegal immigration and the flow of drugs like fentanyl.
Trump's transition team is now readying an announcement of Jamieson Greer as US Trade Representative, people familiar with the matter said, which would put in place a veteran negotiator who has called countering China's trade policies a "generational challenge" for the US.
China responded on Tuesday by defending its track record and refrained from mentioning any planned retaliation.
While calling fentanyl the "US's problem," the Foreign Ministry praised the achievements of counter-narcotics cooperation between the two countries, saying in a statement that China has provided support to fight the trafficking.
"China is willing to continue anti-drug cooperation with the US on basis of equality, mutual benefit and mutual respect," it said. "The US should cherish China's goodwill and maintain the hard-won good situation of China-US anti-drug cooperation."
Liu Pengyu, spokesman for the Chinese embassy in the US, earlier said Beijing had informed Washington of the progress made in counter-narcotics efforts and described as "mutually beneficial" economic and trade cooperation between both countries. "No one will win a trade war or a tariff war," he wrote on X.
What Next
The biggest uncertainty now centers on whether Beijing would reprise a playbook used during the first trade war started by Trump, when Xi's government initially embraced a strategy of "strategic composure" that sought to avoid escalating disputes and generally waited for the US to act before any retaliation.
Later, it switched gears by adopting a more aggressive style of conducting international relations referred to as "Wolf Warrior Diplomacy" - an approach it's since backed away from.
