China Unveils Measured Response to U.S. ‘Fentanyl Tariffs’  

China has launched its first retaliatory measures against the United States following President Trump’s imposition of a universal 10 percent tariff on Chinese imports aimed at curbing Beijing’s role in the ongoing fentanyl crisis. On February 3, Beijing issued new tariffs against the United States, including duties on energy products and other commodities, along with issuing new export controls and launching an antitrust investigation of Google. Defending the move, China’s Finance Ministry said that the initial U.S. tariffs “damage normal economic and trade cooperation between China and the U.S.,” while China’s Foreign Ministry claimed that “fentanyl is America’s problem.” 

These retaliatory tariffs are effectively symbolic in nature, targeting areas unlikely to have a major impact on either American exporters or its own economy. The measures appear carefully calibrated to signal resolve without provoking a serious escalation that Beijing’s fragile economy cannot absorb.  

Retaliatory Measures Hit Targets Not Vital to Chinese Economy 

Immediately after the new U.S. tariffs took effect, China’s Finance Ministry announced limited retaliatory tariffs on U.S. energy and commodity exports. These included a 15 percent duty on coal and liquefied natural gas (LNG) products, along with a 10 percent tariff on crude oil, none of which are major U.S. exports to China. Additionally, China’s Finance Ministry announced a 10 percent tariff on agricultural machinery and large-engine cars, the latter of which may disrupt U.S. auto manufacturers’ efforts to gain a foothold within an already competitive Chinese market.  

China’s response also included other non-tariff retaliatory measures aimed at U.S. exporters. Building on last December’s restrictions on critical mineral exports to the United States, China’s Commerce Ministry announced new export controls on tungsten, tellurium, and other rare earth minerals used in the production of civilian and military products. The new restrictions will likely have a more limited impact than their December precursors since the United States has a broad range of domestic suppliers. Beijing’s State Administration for Market Regulation also launched an antitrust investigation into Google, disrupting its limited operations within the Chinese market, along with listing fashion company PVH Corp and biotech firm Illumina as unreliable entities, subjecting them to sanctions and potentially precluding them from doing business with China.  

China’s Calibrated Approach Indicates Domestic Economic Weakness  

China’s response signals Beijing’s hesitation in confronting Washington while safeguarding its vulnerable economy. While President Xi Jinping seeks to project confidence at home and avoid major concessions, he cannot risk a full-fledged trade war at a time when China cannot afford a sudden plunge in exports.  

Facing low rates of domestic consumption, strong deflationary pressures, and a moribund property sector, the Chinese Communist Party (CCP) has ramped up support for export-oriented manufacturing to drive further economic growth. While this strategy enabled China to run record trade surpluses, it has also left its economy highly vulnerable to foreign trade shocks, underpinning Beijing’s caution. Xi subtly acknowledged this risk during the country’s latest major economic summit, pledging greater stimulus to counteract the potential effect of trade tensions. 

Washington Should Act Forcefully While Reducing China’s Leverage  

In light of the recently canceled phone call between Xi and Trump and Beijing’s seeming unwillingness to engage constructively on the fentanyl issue, the administration should evaluate whether additional tariff measures could force China to the negotiating table. The United States should rely on China’s weakened economy as leverage to force Beijing to curtail its subsidies for fentanyl precursor production and aggressively prosecute trafficking.  

Over the long term, the Trump administration should strengthen its hand by reducing China’s leverage over crucial U.S. supply chains such as critical minerals, legacy semiconductors, and other advanced technologies. These efforts should encourage expanding manufacturing within both the United States and its allies and partners, along with preventing China from gaining greater access to supply chains for critical U.S. technologies, such as drones, medical devices, and remote sensing equipment.  

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD), where Kirin Atluru is an intern. For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.