China hits back with tariffs on US goods after Trump imposes new levies

05 February 2025 - 07:14 By Trevor Hunnicutt and Kevin Huang
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China said it was starting an anti-monopoly investigation in Alphabet's Google. File photo.
China said it was starting an anti-monopoly investigation in Alphabet's Google. File photo.
Image: Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images

China on Tuesday slapped tariffs on US  imports in a swift response to new US duties on Chinese goods, renewing a trade war between the world's top two economies as President Donald Trump sought to punish China for not halting the flow of illicit drugs.

Trump's additional 10% tariff across all Chinese imports into the US came into effect on Tuesday.

Within minutes, China's finance ministry said it would impose levies of 15% for US coal and LNG and 10% for crude oil, farm equipment and some autos. The new tariffs on US exports will start on February 10, the ministry said.

China also said it was starting an anti-monopoly investigation in Alphabet's Google, while including PVH Corp, the holding company for brands including Calvin Klein, and US biotechnology company Illumina on its "unreliable entities list".

Separately, China's commerce ministry and its customs administration said it is imposing export controls on tungsten, tellurium, ruthenium, molybdenum and ruthenium-related items to "safeguard national security interests". China controls much of the world's supply of such rare earths that are critical for the clean energy transition.

Trump on Monday suspended his threat of 25% tariffs on Mexico and Canada at the last minute, agreeing to a 30-day pause in return for concessions on border and crime enforcement with the two neighbouring countries.

However, there was no such reprieve for China, and a White House spokesperson said Trump would not speak to Chinese President Xi Jinping until later in the week.

During his first term in 2018, Trump initiated a brutal two-year trade war with China over its massive US trade surplus, with tit-for-tat tariffs on hundreds of billions worth of goods upending global supply chains and damaging the world economy.

To end that trade war, China agreed in 2020 to spend an extra $200bn (R3.7-trillion) a year on US goods, but the plan was derailed by the Covid pandemic and its annual trade deficit had widened to $361bn, according to Chinese customs data released last month.

"The trade war is in the early stages so the likelihood of further tariffs is high," Oxford Economics said in a note as it downgraded its China economic growth forecast.

Trump warned he might further increase tariffs on China unless Beijing stemmed the flow of fentanyl, a deadly opioid, into the US.

"China hopefully is going to stop sending us fentanyl, and if they're not, the tariffs are going to go substantially higher," he said on Monday.

China has called fentanyl America's problem and said it would challenge the tariffs at the World Trade Organisation and take other countermeasures, but also left the door open for talks.

Stocks in Hong Kong pared gains after China's retaliation.

“Unlike Canada and Mexico, it is clearly harder for the US and China to agree on what Trump demands economically and politically. The previous market optimism on a quick deal looks uncertain," said Gary Ng, senior economist at Natixis in Hong Kong.

"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."

There was relief in Ottawa and Mexico City, and global financial markets, after the deals to avert the hefty tariffs on Canada and Mexico.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to bolster border enforcement efforts in response to Trump's demand to crack down on immigration and drug smuggling. That would pause 25% tariffs due to take effect on Tuesday for 30 days.

Canada agreed to deploy new technology and personnel along its border with the US and launch cooperative efforts to fight organised crime, fentanyl smuggling and money laundering.

Mexico agreed to reinforce its northern border with 10,000 national guard members to stem the flow of illegal migration and drugs.

The US also made a commitment to prevent trafficking of high-powered weapons to Mexico, Sheinbaum said.

"As president, it is my responsibility to ensure the safety of all Americans, and I am doing  that. I am very pleased with this initial outcome," Trump said on social media.

Canadian industry groups, fearful of disrupted supply chains, welcomed the pause.

"That's very encouraging news," said Chris Davison, who heads a trade group of Canadian canola producers.

"We have a highly integrated industry that benefits both countries."

Trump suggested on Sunday the 27-nation EU would be his next target, but did not say when.

EU leaders at an informal summit in Brussels on Monday said Europe would be prepared to fight back if the US imposes tariffs, but also called for reason and negotiation. The US is the EU's largest trade and investment partner.

Trump hinted that Britain, which left the EU in 2020, might be spared tariffs.

Trump acknowledged over the weekend that his tariffs could cause some short-term pain for US consumers, but said they are needed to curb immigration and narcotics trafficking and spur domestic industries.

The tariffs as originally planned would cover almost half of all US imports and would require the US to more than double its own manufacturing output to cover the gap, an unfeasible task in the near term, ING analysts wrote.

Other analysts said the tariffs could throw Canada and Mexico into recession and trigger high inflation, stagnant growth and elevated unemployment at home.

Reuters


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