The flags of China and the US can be seen printed on the paper in this illustration, taken on January 27, 2022.
Dado Ruvic | Reuters
Beijing – China wants to do more to address White House concerns about illegal fentanyl trade, but if the ongoing debate on drugs promotes more US tariffs on the world’s second-largest economy, it’s “a different thing.”
Washington should “greatly thank China” for what it did to limit the US fentanyl trade, authorities said through official English translations.
Since taking office in January, US President Donald Trump has increased tariffs on Chinese goods by 20% based on suspicion of the country’s role in the US fentanyl crisis. Addictive drugs, a precursor produced primarily in China and Mexico, have resulted in overdose deaths in the US every year in tens of thousands
The White House did not immediately respond to CNBC’s request for comment.
Earlier this month, the Chinese government published a white paper to publish efforts to reduce fentanyl precursor production and exports over the last few years. Officials did not respond directly to questions about whether China would halt recent efforts to limit such trade.
Under the Biden administration, the US and China have said that fentanyl is one of the few regions where both countries can cooperate. The two sides held a dedicated consultation in Beijing last year on the topic.
Earlier this year, Trump also showed that tariffs could be used as a way to pressure China to force a Beijing-based deadline.
Trump had emphasized tariffs as a way to reduce the US trade deficit with China during his first presidency. Just before the onset of the Covid-19 pandemic, both parties reached a “Phase 1” trade agreement requiring Beijing to increase purchases of US goods. US data shows that the trade deficit with China has shrunk from $3468.3 billion in 2016 to $295.4 billion in 2024, ahead of Trump’s first order.
However, trade differences have continued since the start of the White House leader’s second mission in January. The average valid US tariff rate for Chinese goods is set to reach around 33%, from about 13% before Trump began his latest term.
Beijing is responding to the latest US tariffs with targeted obligations on energy and agricultural products, while tightening restrictions on exports of critical minerals needed by the US. China’s Ministry of Commerce has added several US companies, primarily in aerospace or defense, to its list that limits its ability to do business with China.
Foreign Ministry officials said Wednesday that China’s measures were “legitimate actions” to protect their own interests.
Allianz estimates that an additional 20% US tariff on Chinese products will rise by 0.6 percentage points this year and next year and this year. However, the company expects the Chinese economy to increase 4.6% this year and 4.2% in 2026, based on the assumption that stimulus can mitigate the impact of tariffs.
“There’s a tendency to say that retaliation isn’t that strong, and it probably leaves room for negotiation,” Françoise Fan, senior economist at Allianz Trade in Asia-Pacific and World Trade, said in an interview with CNBC last week.
