Trade war escalates as China retaliates with tariffs on US goods

China has imposed fresh tariffs on U. imports in a swift response to new duties announced by President Donald Trump, reigniting a trade war between the world’s two largest economies.

Beijing’s Finance Ministry announced on Tuesday that it would impose a 15% levy on U.S. liquefied natural gas (LNG) and coal, along with a 10% tariff on crude oil, farm equipment, and certain automobiles. The new tariffs will take effect on 10 February.

This came just hours after the U.S. enforced a 10% duty on all Chinese imports, a measure Trump justified by accusing Beijing of failing to curb the flow of illicit drugs into the United States.

In addition to tariffs, China launched an anti-monopoly probe into Alphabet Inc.’s Google and placed companies such as PVH Corp and US biotech firm Illumina on its “unreliable entities list.”

The government also imposed export controls on rare earth metals, which are crucial for global energy and technology industries.

Markets react as tensions rise

The escalation sent ripples through financial markets. Hong Kong stocks pared gains, while the Chinese yuan weakened against the dollar, dragging the Australian dollar lower.

Oxford Economics warned that the likelihood of further tariffs remains high, prompting a downgrade in China’s economic growth forecast.

“Unlike Canada and Mexico, it is clearly harder for the US and China to agree on what Trump demands economically and politically,” said Gary Ng, senior economist at Natixis in Hong Kong.

Neighbouring countries secure reprieve

While China faces increased trade restrictions, Mexico and Canada secured a temporary relief. Trump agreed to delay 25% tariffs on the two nations for 30 days after reaching deals on border security and crime enforcement.

Canada pledged to deploy advanced surveillance and personnel to combat organised crime and drug smuggling, while Mexico committed 10,000 National Guard troops to reinforce its northern border.

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

Despite the brief pause for North American allies, Trump hinted at further trade measures against the European Union, warning that the bloc could be his next target.