China's Response to Tariffs, Threatens Sanctions on U.S. Companies

• President Trump signed an executive order imposing higher tariffs on Chinese products
• China retaliated with tariffs and threats to sanction American companies operating in China
• The U.S. could have leverage due to a larger amount of Chinese goods affected by tariffs

The government of the People's Republic of China has announced a retaliation to Donald Trump’s import tariffs, sparking the potential beginning of a trade war between the two most powerful economies in the world. 

Earlier this week, President Trump signed an executive order imposing higher tariffs on Chinese products. The new measure includes a 10% levy on a wide range of Chinese goods, including electronics, machinery, clothing, medical supplies, and a wide range of crude manufacturing materials like metal and aluminum. 

The new tariffs are part of a broader plan by the U.S. President, who appears to be using global trade as a potential leverage to reduce international debt. Some of the biggest U.S. trading partners like Mexico and Canada were also hit with import taxes. 

China retaliated against the new measure by imposing 15% levies for coal LNG, as well as a 10% tax on crude oil, machinery, and vehicles. The Asian nation also threatened to sanction American companies operating in China, like Google, PHV Corp, and Illumina.

Reuters, citing research from Capital Economics, discloses that despite the ongoing trade war, the U.S. could have additional leverage in a trade war against China, due to the East Asian nation's larger exposure to U.S. Products. 

Trump’s tariffs on Chinese products affect a significantly larger amount of capital than the other way around. While Chinese taxes affect “only” $20 billion — the U.S. taxes would affect over $450 billion in Chinese goods. 

While this data may seem optimistic about Trump’s chances — an all-out trade war with China would still significantly affect the American economy and its inflation rates. Today, China is the largest trading partner of the U.S., with a yearly trade capital flow larger than all of the European Union trades with the United States.

Donald Trump and the Chinese President Xi Jinping are expected to meet next week to hopefully arrange common ground. Meanwhile, crypto and stock are expected to behave more volatile than usual due to the economic uncertainty from this uncertain shift in trade policy.