How Google is caught amid a tariff war between US and China

China has announced retaliatory tariffs on some American products in a tit-for-tat move. Beijing’s decision came just minutes after United States President Donald Trump’s 10 per cent tariff on Chinese goods came into effect at 12:01 am ET (10:31  am IST) on Tuesday (February 4).

For the unversed, tariffs are taxes charged on goods imported from other countries. Besides imposing tariffs on a raft of US goods, China has also announced an antitrust investigation into Google.

Let’s take a closer look.

China’s tariffs on US goods

China’s Finance Ministry said it will impose tariffs on several US goods, including 15 per cent on coal and liquefied natural gas (LNG) and 10 per cent on crude oil.

Agricultural machinery, pickup trucks and large-engine cars from the US will also attract a 10 per cent tax.

“The US’s unilateral imposition of tariffs seriously violates the rules of the World Trade Organization,” China’s Finance Ministry said in a statement, as per Bloomberg. “It is not only unhelpful in solving its own problems, but also undermines the normal economic and trade cooperation between China and the US.”

The tariffs would take effect next Monday (February 10).

Moreover, China’s Commerce Ministry and its Customs Administration imposed export controls on 25 rare metal products including tungsten, tellurium, ruthenium, molybdenum and ruthenium-related items to “safeguard national security interests”.

As Reuters noted, China controls most of the world’s supply of such rare earths important for the clean energy transition.

Beijing also added two US companies to its “unreliable entity” list. PVH Corp, the holding company for brands including Calvin Klein and Tommy Hilfiger, and US biotechnology firm Illumina have been barred from participating in China-related import or export activities and making new investments in the Asian country, as per Associated Press (AP).

China’s commerce ministry accused the US companies of “discriminatory measures against Chinese enterprises”. It also said the step was taken to “safeguard national sovereignty, security and development interests, in accordance with relevant laws”.

Beijing’s move comes after Trump announced an additional 10 per cent tariff on Chinese imports, accusing China of failing to prevent the flow of illegal drugs into the US.

Why China is targeting Google

Apart from tariffs on US goods, China has also launched an anti-monopoly investigation into Alphabet Inc’s Google.

The probe will be carried out by the State Administration for Market Regulation, China’s competition watchdog, for alleged violation of anti-monopoly laws by Google.

So far, there are no additional details on the investigation.

Google’s search services have been blocked in China since 2010. However, the tech giant continues to provide apps and games to the Chinese market through partnerships with local developers, reported BBC.

In 2011, Google shut down its Chinese-language search engine in the mainland and transferred it to Hong Kong. By 2014, China blocked the last way to access Google’s email service Gmail, as per The Guardian. 

China has targeted US companies using antitrust regulation in the past.

In December, Beijing launched an antitrust probe into US chip giant Nvidia alleging violations of anti-monopoly law. It was widely seen as a move to counter Washington’s curbs on the Chinese chip sector.

Meanwhile, Google is facing scrutiny in several countries including the US. Its dominance in web search, smartphone software and online advertising has been questioned by regulators around the world in recent years.

In August last year, Google lost a lawsuit filed by the US government in 2020 alleging the firm had a monopoly in the general search market by developing strong barriers to entry. After the ruling, the US Department of Justice called for the tech giant to divest its Chrome browser.

Google is also being probed by the UK’s Competition and Markets Authority over whether it has “strategic market status” under the country’s new competition rules.

A new trade war?

China’s retaliatory tariffs against the US have renewed a trade war between the world’s top two economies.

Beijing said Tuesday it filed a complaint with the World Trade Organization (WTO) “to defend its legitimate rights and interests” in response to the US’ additional tariffs on imported Chinese goods.

“China has filed a case against the US tariff measures under the WTO dispute settlement mechanism,” the commerce ministry said in a statement, dubbing the US actions of a “malicious nature”, reported The Guardian.

In 2018, when Trump imposed the first round of tariffs on China, Beijing had said it was “not afraid of a trade war”. However, this time around, China’s reaction is being seen as measured.

A more aggressive response would have plunged ties between the US and China, which have become stable since President Xi Jinping met with then-US President Joe Biden in San Francisco in November 2023.

“This can be interpreted as a warning shot to US enterprises with a high-dependency on China’s market,” Lynn Song, chief economist for Greater China at ING Bank in Hong Kong told Bloomberg. “There is still hope that tariffs could get quickly unwound or pushed back after face-to-face talks.”

Song called Beijing’s move a “fairly muted retaliation,” noting that energy constitutes a small share of China’s imports from the US.

A trade war will harm both countries which are among each other’s top trading partners.

On Monday, Trump suspended his threat of 25 per cent tariffs on Mexico and Canada at the last minute. However, no such reprieve was offered to China.

This time, Beijing has called on Washington to hold talks and “meet China halfway”. As per the White House, Trump and Xi are expected to speak later this week.

It remains to be seen if the US and China can reach a deal, putting an end to the tit-for-tat trade war.

With inputs from agencies