China is targeting US services and other sectors to reduce “meaningless” tariff hikes on goods

China announced last week that retaliation against President Donald Trump’s tariffs and that further increases by the US were “joking” and that Beijing would “ignor” them.

However, instead of continuing to focus on customs duties on goods, China has opted to resort to other measures, including a step to target the US services sector.

Trump has jacked taxation on certain goods from China by up to 245% after several tat measures with Beijing in recent weeks. Before calling it a “meaningless number game,” China imposed an additional obligation last week on imports from the US up to 125%.

While the Trump administration has focused primarily on pushing tariff plans, Beijing has rolled out a series of non-tariff restrictions, including expanding export controls for rare earth minerals and opening antitrust probes for American companies such as drug giant DuPont and IT Major Google.

Before the latest escalation, in February, Beijing had dozens of US companies on its so-called “unreliable entities” list that would limit or prohibit businesses from trading or investing in China. American companies such as PVH, the parent company of Tommy Hilfiger, and Illumina, a gene sequencing device provider, have been added to the list.

To tighten exports of critical mineral elements, Chinese companies must ensure special licenses for exporting these resources, effectively limiting access to the key minerals needed for semiconductors, missile defense systems and solar cells.

According to Bloomberg, Beijing chased after Boeing in its latest move on Tuesday, ordering America’s biggest exporter, Boeing (the US largest exporter), to stop delivering further deliveries to jets and demanding that they stop purchasing aircraft-related equipment and parts from US companies.

When delivery to China is cut off, the problems with cash-bound plane manufacturers suffer from the distinctive quality control crisis.

In another indication of growing hostility, Chinese police issued a notice for arresting three people who claimed to have engaged in a cyberattack on China on behalf of the US National Security Agency.

China’s state media, which issued the notice, urged domestic users and businesses to avoid using American technology and replace it with domestic alternatives.

Wendy Cutler, vice president of the Asian Association Policy Research Institute, said:

“Decoupling of the two economies is all-out as high tariffs and other restrictions are in place,” Cutler said.

China is seen as someone seeking to expand the trade war to encompass trade in services covering travel, law, consulting and financial services that the US has had a significant surplus with China over the years.

Earlier this month, social media accounts related to China’s state media suggested that newcomers could lean curb on legitimate US consulting firms and consider a survey of US companies into Chinese operations for the huge “monopoly benefits” they gain from intellectual property rights.

Nomura estimates that China’s imports of US services have more than 10 times higher than $55 billion in 2024 over the past 20 years, bringing the US trade-to-service surplus to $32 billion last year.

Last week, China said it was a sign of Beijing’s intention to reduce US film imports, warn citizens about travel and studying in the US, and put pressure on the US entertainment, tourism and education sectors.

Jinkian, managing director of China Analytical Centre, said:

Given the small size of these sectors, the real impact of the dollar may be low, but “the impact of reputations such as Chinese students and more cautious Chinese employees can ripple through the academia and technical talent ecosystem,” he added.

If Beijing significantly tightens travel restrictions to the US, Nomura estimates $24 billion is at risk

According to Nomura, the trip controlled US services to China, reflecting spending by millions of Chinese tourists in the US. Within the travel, education-related spending is estimated to lead by 71%, mainly from the tuition fees and living expenses of over 270,000 Chinese students studying in the United States.

The investment company’s entertainment exports, including film, music and television shows, account for just 6% of US exports within the sector.

“We could see deeper separation not only in the supply chain, but in the framework of people-to-people bonds, knowledge exchange and regulatory, which could indicate a shift from transactional tension to systemic divergence,” Qian said.

Analysts are primarily hoping that Beijing will continue to deploy an arsenal of non-tariff policy tools to increase leverage ahead of potential negotiations with the Trump administration.

“From the Chinese government’s perspective, the business of US companies in China is the biggest goal of causing pain to the US.

Apple, Tesla, pharmaceutical companies and medical device companies are among the companies that Beijing could be targeted to acquire non-voluntary measures, such as sanctions, regulatory harassment, and export controls.

The deal may allow both sides to unleash some of the retaliatory measures, but hopes for short-term consultations between the two leaders are rapidly fading.

Chinese officials have imposed “unilateral tariffs” imposed by Trump as “bullying” and vowed to “fight until the end.” Still, Beijing keeps the door open for negotiations, but they must be on a “equal footing.”

Earlier this week, White House spokesman Caroline Leavitt said Trump is open to doing business with China, but Beijing needs to make the first move. “The ball is in the Chinese court. China needs to deal with us, but we don’t need to deal with them,” she said.

In response to that statement, a spokesman for the Chinese Commerce Department said in a daily briefing on Thursday that Beijing has accepted negotiations with Washington on economic and trade issues, but the US, according to CNBC translations, “must stop threats and threats.”

“In the end, only when the country experiences sufficient self-harm, it may be possible to consider softening that stance and truly returning to the negotiation table.”