China Retaliates with Tariffs on U.S. Goods Following New Levies Imposed by Trump

China Imposes Tariffs on U.S. Imports as Trade War Escalates.

On Tuesday, China imposed tariffs on certain U.S. imports in response to new U.S. duties on Chinese goods, reigniting a trade war between the world’s two largest economies. This move came even as President Donald Trump granted temporary reprieves to Mexico and Canada.

A new 10% tariff on all Chinese imports to the U.S. took effect at 12:01 a.m. ET (0501 GMT) on Tuesday, following repeated warnings from Trump that Beijing was not doing enough to curb the flow of illicit drugs into the U.S.

Within minutes, China’s Ministry of Finance announced it would impose a 15% levy on U.S. coal and liquefied natural gas (LNG) and a 10% tariff on crude oil, farm equipment, and certain automobiles. Additionally, China launched an anti-monopoly investigation into Alphabet Inc.’s Google and added PVH Corp., the parent company of brands like Calvin Klein, and U.S. biotechnology firm Illumina to its “unreliable entities list.”

Separately, China’s Ministry of Commerce and its Customs Administration announced export controls on certain rare earth elements and metals critical for high-tech gadgets and the clean energy sector. These new tariffs on U.S. exports will take effect on February 10, giving both nations some time to negotiate a deal. According to a White House spokesperson, Trump is expected to speak with Chinese President Xi Jinping later in the week.

On Monday, Trump suspended his threat to impose 25% tariffs on Mexico and Canada at the last minute, agreeing to a 30-day pause in exchange for commitments on border security and crime enforcement.

During his first term in 2018, Trump initiated a two-year trade war with China over its substantial trade surplus with the U.S. The conflict resulted in tit-for-tat tariffs on hundreds of billions of dollars in goods, disrupting global supply chains and slowing the world economy.

“The trade war is still in its early stages, and the likelihood of additional tariffs remains high,” Oxford Economics noted in a report, lowering its forecast for China’s economic growth.

Trump also warned he might impose further tariffs unless China takes stronger action to prevent fentanyl, a deadly opioid, from reaching the U.S.

“China, hopefully, is going to stop sending us fentanyl, and if they don’t, the tariffs will go up substantially,” Trump said Monday.

China, in turn, has argued that fentanyl is an American issue and vowed to challenge the tariffs at the World Trade Organization while keeping the door open for negotiations.

The U.S. is a relatively small supplier of crude oil to China, accounting for just 1.7% of its imports last year—approximately $6 billion. Additionally, just over 5% of China’s LNG imports come from the U.S. Following China’s announcement, crude oil prices fell by 2%, Hong Kong stocks pared gains, and the dollar strengthened. Meanwhile, the Chinese yuan, euro, Australian and Canadian dollars, and Mexican peso all declined, reflecting market concerns over a prolonged global trade war.

“Unlike Canada and Mexico, it is much harder for the U.S. and China to agree on Trump’s economic and political demands,” said Gary Ng, a senior economist at Natixis in Hong Kong. “The previous market optimism for a quick deal remains uncertain. Even if the two nations reach agreements on some issues, tariffs could become a recurring tool, creating ongoing market volatility this year.”

Meanwhile, Canadian and Mexican officials expressed relief after their leaders reached a temporary deal with Trump. Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum agreed to strengthen border enforcement to address Trump’s concerns about immigration and drug smuggling. This agreement temporarily suspends the planned 25% tariffs for 30 days.

As part of the deal, Canada will deploy new technology and additional personnel along its border with the U.S. and enhance cooperation to combat organized crime, fentanyl trafficking, and money laundering. Mexico has committed to deploying 10,000 National Guard members to its northern border to curb illegal migration and drug smuggling.

“As President, it is my responsibility to ensure the safety of ALL Americans, and I am doing just that. I am very pleased with this initial outcome,” Trump said on social media.

Industry groups in Canada welcomed the temporary pause, citing concerns over potential supply chain disruptions.

“That’s very encouraging news,” said Chris Davison, head of a trade group representing Canadian canola producers. “We have a highly integrated industry that benefits both countries.”

Trump also suggested on Sunday that the 27-nation European Union could be his next trade target but did not specify a timeline.

At an informal summit in Brussels on Monday, EU leaders warned they would retaliate if the U.S. imposed tariffs, while also calling for negotiations. The U.S. is the EU’s largest trade and investment partner. However, Trump hinted that Britain, which left the EU in 2020, might be spared from potential tariffs.

Over the weekend, Trump acknowledged that his tariffs could cause short-term pain for American consumers. However, he defended them as necessary to curb immigration, combat drug trafficking, and strengthen U.S. industries.