- Beijing Announces Immediate Countermeasures Following Trump’s New Tariff Hike
China’s Ministry of Finance announced a sweeping set of tariffs on key US exports on Tuesday in swift retaliation to the 10 per cent tariff imposed on Chinese goods by US President Donald Trump. The move signals a renewed escalation in trade tensions between the world’s two largest economies, reigniting fears of a prolonged economic standoff with far-reaching global implications.
Effective February 10, China will impose a 10 per cent tariff on US crude oil, farm equipment, large-displacement vehicles, and pickup trucks. Additionally, a 15 per cent tariff will be levied on US coal and liquefied natural gas (LNG). Beijing’s commerce ministry issued a scathing statement condemning the US tariffs, asserting that they “seriously violate World Trade Organization (WTO) rules.”
The tit-for-tat measures come after the US tariffs took effect earlier on Tuesday, ostensibly in response to China’s alleged failure to halt the flow of illicit drugs, particularly fentanyl, into the United States.
The US-China trade war, which previously wreaked havoc on global markets between 2018 and 2020, now appears to be reigniting. Trump has made it clear that there will be no immediate talks with Chinese President Xi Jinping, with White House sources confirming discussions would only take place later this week.
Oxford Economics, a leading research firm, warned that this “early stage of renewed tariffs” heightens the likelihood of further economic measures, with potential negative impacts on China’s economic growth forecast.
Beijing, in its response, has vowed to challenge the US tariffs at the WTO while simultaneously keeping the door open for potential negotiations.
“We will not back down from defending our nation’s interests, but we are also ready to engage in talks when the conditions are fair and respectful,” a Chinese commerce official said.
President Trump justified the tariffs by framing them as a measure to combat the opioid crisis in the US, where fentanyl has fueled a devastating wave of addiction and deaths.
“China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” Trump declared on Monday.
China, however, has consistently dismissed these accusations, arguing that America’s opioid crisis stems from domestic issues rather than Chinese exports.
The immediate impact of China’s tariff announcement was felt across financial markets. Crude oil prices tumbled by 2 per cent, and stocks in Hong Kong pared earlier gains. The Chinese yuan, the euro, and commodity-linked currencies such as the Australian and Canadian dollars all fell, reflecting investor anxiety over the risk of a prolonged global trade conflict.
China, which imported approximately US$6 billion worth of crude oil from the US last year, is a relatively small market for American oil. Nevertheless, the tariff escalation is expected to disrupt energy trade and further destabilize supply chains.
The LNG market could also be significantly affected, as over 5 per cent of China’s LNG imports come from the US.
In addition to the new tariffs, China announced a probe into US tech giant Google and added US fashion group PVH Corp (which owns Tommy Hilfiger and Calvin Klein) and biotech leader Illumina to its “unreliable entities” list.
Beijing also unveiled fresh export controls on rare metals and chemicals essential for industrial applications, such as tungsten, tellurium, bismuth, and molybdenum. These moves are likely to further strain relations between the two superpowers and disrupt the supply chains of various industries reliant on these critical materials.
In stark contrast to the hardline stance on China, Trump suspended his threat of 25 per cent tariffs on Canada and Mexico at the last minute. This decision followed last-minute concessions from both nations on border security and crime enforcement.
Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum both agreed to bolster border enforcement to address Trump’s concerns over illegal migration and drug trafficking.
Canada pledged to deploy advanced technology and personnel along its border with the US and ramp up efforts to combat organized crime and fentanyl smuggling. Mexico, meanwhile, committed 10,000 National Guard members to its northern border to stem illegal migration and narcotics flows.
In a reciprocal move, the US vowed to curb the trafficking of high-powered weapons into Mexico.
Trump expressed satisfaction with the agreements, stating on social media, “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.”
The Canadian dollar surged after the announcement, recovering from a recent slump. US stock index futures also rose after a day of losses on Wall Street, though oil prices remained subdued.
Trade industry groups welcomed the temporary reprieve for Canada and Mexico, citing fears of disrupted supply chains.
Chris Davison, head of a Canadian trade group for canola producers, called the development “very encouraging news.”
However, analysts remain cautious. Gary Ng, a senior economist at Natixis in Hong Kong, highlighted the difficulties in reaching a long-term solution between the US and China.
“Unlike Canada and Mexico, it is clearly harder for the US and China to agree on what Trump demands economically and politically. Even if the two countries can agree on some issues, it is possible to see tariffs being used as a recurrent tool, which can be a key source of market volatility this year,” Ng warned.
Trump has hinted that the European Union may be his next target for tariffs, though no timeline has been set.
EU leaders, meeting in Brussels on Monday, emphasized their readiness to retaliate if necessary but also called for reasoned negotiation. The US is the EU’s largest trade and investment partner, and further disruptions could have severe economic consequences for both sides.
Britain, which left the EU in 2020, appears to be in a more favorable position, with Trump suggesting it might be spared from the tariff crosshairs.
While Trump’s tariffs are aimed at strengthening domestic industries and curbing drug trafficking, experts have warned of potential economic pain for US consumers.
“The tariffs as originally planned would cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap – an unfeasible task in the near term,” analysts from ING wrote in a note.
Others cautioned that the economic fallout could plunge Canada and Mexico into recession and trigger “stagflation” – high inflation, stagnant growth, and elevated unemployment – in the US.
Despite the immediate relief for Canada and Mexico, the ongoing trade conflict with China remains a significant threat to global economic stability. With talks between the two superpowers hanging in the balance, the world braces for the next chapter in this high-stakes trade saga.
