China responds to tariffs with a shocking move | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

If you’re wondering why the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 are all falling today, consider the recent news out of Washington, D.C.

U.S. President Donald Trump is moving forward with his plan to implement high tariffs on all U.S. imports from Canada and Mexico. This has been in the works since the first days of his presidency, but now the U.S. economy is moving closer to a trade war, and financial markets are already paying the price.

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In addition to the 25% tariff that Trump has levied against Canada and Mexico, he has also doubled the previous tariff against Chinese imports, raising it from 10% to 20%. So far, both Canada and China have retaliated against Trump, making it clear that they will not be strong-armed into bending to his will.

The impact of these tariffs on the U.S. from its top trading partners is likely to be severe, particularly for certain sectors.

China fires back at the U.S. after delayed tariff response

With markets in turmoil and uncertainty continuing to push stocks down, many questions are rising about why Trump is opting for tariffs that are already negatively impacting his economy, specifically against the U.S.’s top trading partners.

“In theory, the tariffs are supposed to punish the three countries for doing too little to stop the flow of the highly addictive drug fentanyl into the U.S.,” reports Charley Blaine of TheStreet.

However, if the global trade war continues, the economic burden appears to be shifted to consumers, who will be forced to pay higher prices for many things, including electronics, household goods, and automobiles.

While much of the recent focus has been on how the trade war will impact U.S. consumers and markets, tech companies that do business in China stand to be impacted by the nation’s retaliatory tariffs against the U.S.

As Jeff Le, Jeff Le, a Principal at 100 Mile Strategies, notes, China initially exercised restraint, even after Trump first levied a 10% tariff against it, and only took action when Trump doubled it. He discussed what this may mean for U.S. tech companies, stating:

“The White House elevating the tariff to 20% created a response that impacts global IT spend reductions and puts additional pressure on industry-specific innovation spheres, including in agtech (to the additional 10-15% on the agricultural sector) and national security where the increases impact the broader supply chain of investments.”

These aren’t the only industries facing significant pressure from China’s tariffs. U.S. companies that sell products in China and to Chinese companies will likely face higher costs. If they are forced to raise prices, it could undermine U.S. competitiveness in China, as lower-priced Chinese alternatives become more appealing to consumers.

Reuters reports that of the companies with the highest net sales in China in recent years, the majority are in the semiconductor space, such as Intel (INTC) and Applied Materials (AMAT) . However, the list also includes big tech leaders Apple (AAPL) and Tesla (TSLA) .

As China stands its ground, who stands to lose the most?

Overall, U.S. semiconductor producers may be the most impacted by China’s tariffs, particularly if they also build components for chipmaking.

A more recent report from Coface notes that “nearly 30% of semiconductor manufacturing machinery exported by the United States is still destined for China.”

However, as Le also highlights, these measures from the Chinese government could spill over into more industries as well, complicating matters for other U.S. companies.

“The likelihood of increased prices on lithium and lithium-powered products like batteries, could have a disproportionate impact at a time where the United States and Ukraine have not settled a prospective rare earths deal, to include access to lithium deposits,” he states.

That could significantly impact automakers, particularly those in the electric vehicle (EV) space and it comes at a time when Tesla is already struggling to maintain its global dominance.

Le notes that reaching a deal could be more pressing now for the White House as China has made it clear it will not hesitate to apply pressure in response to Trump’s tariffs.