China warns of countermeasures over expanded US investment curbs on biotech
A Chinese official stated that it “firmly opposes” a US Treasury proposal to expand the scope and increase the severity of restrictions on US investment in China, calling it discriminatory and “a typical example of an overly broad application of national security concerns,” Bloomberg reported over the weekend.
China’s Commerce Ministry said it would watch subsequent developments closely and warned the rule would damage economic ties between the two countries, adding that China retains the right to take corresponding measures, without specifying what those might be.
On Thursday, the US Treasury proposed a rule expanding the Outbound Investment Security Program, tightening limits on US investment in hypersonics, quantum, high-performance computing, supercomputing and AI in China, Russia and North Korea. The measure also added biotechnology to the targeted sectors.
Market reaction
The China-proxy Australian Dollar (AUD) edges lower following this developments. At the time of writing, the AUD/USD pair is down 0.09% on the day at 0.7028.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.