Wrapup 5: China hits back with tariffs on US goods after Trump imposes new levies

PVH

04/02/2025 07:09

(Adds detail on market reaction paragraph 14)

        * 
      Additional 10% tariff comes into effect on all China
exports to
US
    

        * 
      Beijing slaps 15% levy on U.S. LNG, coal; 10% on crude,
farm
equipment
    

        * 
      China starts anti-monopoly investigation into Google,
imposes
controls on rare earth exports 
    

        * 
      Trump pauses tariffs on Mexico and Canada for one month
    

        * 
      Mexico, Canada to bolster border enforcement
    

        * 
      EU leaders highlight risk risks of trade war
    

  
    By Trevor Hunnicutt and Kevin Huang
       WASHINGTON/BEIJING, Feb 4 (Reuters) - China on Tuesday
slapped tariffs on some U.S. imports in a swift response to new
U.S. duties on Chinese goods, renewing a trade war between the
world's top two economies even as President Donald Trump offered
reprieves to Mexico and Canada.
    Additional 10% tariff across all Chinese imports into the
U.S. came into effect at 12:01 a.m. ET on Tuesday (0501 GMT)
after Trump repeatedly warned Beijing it was not doing enough to
halt the flow of illicit drugs into the United States. 
    Within minutes, China's Finance Ministry said it would
impose levies of 15% for U.S. coal and LNG and 10% for crude
oil, farm equipment and some autos. 
    China also said it was starting an anti-monopoly
investigation in Alphabet Inc's  GOOGL.O  Google, while
including both PVH Corp  PVH.N   the holding company for brands
including Calvin Klein, and U.S. biotechnology company Illumina
on its "unreliable entities list".    
    Separately, China's Commerce Ministry and its Customs
Administration said it is imposing export controls some rare
earths and metals that are critical for hi-tech gadgets and the
clean energy transition.
    China's new tariffs on the targeted U.S. exports will start
on Feb. 10, the ministry said, giving Washington and Beijing
some time to try and reach a deal. Trump plans to speak to
Chinese President Xi Jinping later in the week, a White House
spokesperson said.
    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. 
    During his first term in 2018, Trump initiated a brutal
two-year trade war with China over its massive U.S. trade
surplus, with tit-for-tat tariffs on hundreds of billions of
dollars worth of goods upending global supply chains and
damaging the world economy.
    "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 increase tariffs on China further
unless Beijing stemmed the flow of fentanyl, a deadly opioid,
into the United States.
    "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 Organization and
take other countermeasures, but also left the door open for
talks.
    The U.S. is a relatively small source of crude oil for
China, accounting for 1.7% of its imports last year, worth about
$6 billion. Just over 5% of China's LNG imports come from the
U.S.
    Crude prices extended losses to tumble 2% after China's
retaliation, and stocks in Hong Kong pared gains. The dollar
strengthened while the Chinese yuan, the euro, Australian and
Canadian dollars as well as the Mexican peso all fell,
reflecting growing market concerns about the risk of a
protracted global trade war.  MKTS/GLOB 
    “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, 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."
           
    NEIGHBOURLY DEALS
    There was relief in Ottawa and Mexico City after both
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 United States and launch cooperative efforts
to fight organized 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.
    "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.
    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 European Union 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 U.S. imposes
tariffs, but also called for reason and negotiation. The U.S. 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 U.S. consumers, but says they are
needed to curb immigration and narcotics trafficking and spur
domestic industries.

 (Reporting by David Alire Garcia, Stefanie Eschenbacher and
Brendan O'Boyle in Mexico City; Andrea Shalal, Jarrett Renshaw,
David Lawder, Trevor Hunnicutt, Nandita Bose, Daphne Psaledakis,
Douglas Gillison, Doina Chiacu and Susan Heavey in Washington;
David Ljunggren and Promit Mukherjee in Ottawa; Ed White in
Winnipeg; Kevin Krolicki and Qiaoyi Li in Beijing; Josephine
Mason in London; Bart H. Meijer, Alessandro Parodi, Charlotte
Van Campenhout, Andrew Gray, Sudip Kar-Gupta and Geert De Clerq
in Europe; Writing by Andy Sullivan and Lincoln Feast; Editing
by Rosalba O'Brien and Shri Navaratnam)
 ((lincoln.feast@thomsonreuters.com; +61 478320778;))