Beijing responds swiftly to Trump’s latest tariff measures

China imposes levies on U.S. coal, LNG, and crude oil after Trump enacts new tariffs.

Cargo shipping containers are stacked on the Evergreen Ever Fame container ship docked at a terminal in the Port of Los Angeles, California, on February 3, 2025. Photo by Patrick T. Fallon/AFP/Getty Images

By Alana Salsabila and Nada Fadiyah

China has announced new tariffs on U.S. imports, retaliating against President Donald Trump’s decision to impose a 10% duty on all Chinese goods entering the United States. The move, which renews tensions between the world’s two largest economies, comes as Trump pressures Beijing to curb the flow of illicit drugs, particularly fentanyl, into the U.S.

Trump’s tariffs took effect at 12:01 a.m. ET on Tuesday (0501 GMT), prompting a near-immediate response from China’s Finance Ministry. Beijing has levied 15% tariffs on U.S. coal and liquefied natural gas (LNG), while crude oil, farm equipment, and certain automobile imports now face a 10% duty. China’s new tariffs will take effect on February 10.

In addition to trade measures, China has escalated its response by launching an anti-monopoly investigation into Alphabet Inc.’s Google. The Chinese government has also added PVH Corp, the parent company of Calvin Klein, and biotechnology firm Illumina to its “unreliable entities list,” further straining U.S.-China economic relations.

China’s retaliation extends beyond tariffs and regulatory scrutiny. The Commerce Ministry, alongside the Customs Administration, has imposed new export controls on crucial rare earth materials, including tungsten, tellurium, ruthenium, and molybdenum. These elements are vital for clean energy technologies, and China dominates global production, making the restrictions a significant move in the trade standoff.

The measures are being framed as efforts to safeguard national security, but analysts see them as a strategic counterpunch to U.S. trade actions. With rare earth minerals playing a key role in global supply chains, the restrictions could impact industries ranging from semiconductors to electric vehicle manufacturing.

Trump spares Canada and Mexico but stands firm on China

While China faces no reprieve, Trump has temporarily suspended planned 25% tariffs on imports from Canada and Mexico, opting instead for a 30-day negotiation period. The decision follows last-minute agreements with both nations to strengthen border security and crack down on drug trafficking.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum confirmed their respective commitments, which include:

Canada: Deploying advanced border security technology and increasing cooperation on organized crime, fentanyl smuggling, and money laundering.
Mexico: Mobilizing 10,000 National Guard members along the northern border to curb illegal migration and drug smuggling.

In return, the U.S. has pledged to tighten controls on the trafficking of high-powered firearms into Mexico. The pause in tariffs has been met with relief from Canadian and Mexican industries, which feared severe economic disruption.

Trade war with China intensifies amid fentanyl dispute

Trump has tied his latest trade measures to China’s role in the fentanyl crisis, warning that tariffs will rise further unless Beijing takes concrete action to stem the flow of the deadly opioid into the U.S.

“China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” Trump said on Monday.

China, however, has pushed back against the accusation, arguing that fentanyl abuse is a domestic issue for the United States. Beijing has vowed to challenge Trump’s tariffs at the World Trade Organization (WTO) and consider further countermeasures while leaving room for negotiations.

Financial markets in Hong Kong reacted negatively to China’s retaliation, with stocks paring gains following the announcement of new tariffs. Economists warn that the renewed trade war could significantly impact global supply chains, potentially leading to inflationary pressures and economic slowdowns in both countries.

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

Oxford Economics has already downgraded its growth forecast for China, citing the likelihood of further tariff escalations. The firm noted that the trade war is still in its early stages, suggesting that additional U.S. duties on Chinese goods remain a strong possibility.

Europe may be next in Trump’s trade crackdown

While China is currently Trump’s primary target, the president has hinted that the European Union (EU) could be next. Over the weekend, he suggested that the 27-nation bloc might face new U.S. tariffs, though he provided no specific timeline.

European leaders gathered for an informal summit in Brussels on Monday, where they expressed a willingness to negotiate but also warned of retaliatory measures if the U.S. proceeds with trade restrictions. Trump signaled that Britain, which exited the EU in 2020, may be exempt from any forthcoming tariffs.

Despite acknowledging that tariffs could lead to higher prices for American consumers, Trump has defended his strategy as necessary for economic and national security. He claims the measures will help reduce illegal immigration, combat drug trafficking, and boost domestic manufacturing.

However, economists caution that the tariffs—particularly if extended to European imports—could trigger economic disruptions. ING analysts warn that covering the shortfall from lost Chinese imports would require the U.S. to more than double its own manufacturing output, an unrealistic goal in the short term.

Others predict that the trade war could push Canada and Mexico into recession while potentially triggering stagflation in the U.S., characterized by high inflation, sluggish growth, and rising unemployment.

Outlook for U.S.-China trade relations

With both countries showing no signs of backing down, tensions between the U.S. and China are set to remain a major source of economic uncertainty. Trump has confirmed that he will not speak with Chinese President Xi Jinping until later in the week, leaving open the possibility of further retaliatory measures in the meantime.

As the trade war escalates, businesses, consumers, and global markets will be closely watching for any signs of de-escalation or further economic fallout.