Wrapup 7: China launches limited tariffs after Trump imposes sweeping new levies

PVH

04/02/2025 10:36

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

        * 
      Beijing responds with limited tariffs on smaller set of US
imports
    

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

        * 
      Trump pauses tariffs on Mexico and Canada for one month
    

        * 
      Mexico, Canada to bolster border enforcement
    

        * 
      EU leaders highlight risks of trade war
    

  
 (Recasts first paragraph, adds context on the scope of China
sanctions in paragraphs 2-4)
    By Trevor Hunnicutt and Kevin Huang
       WASHINGTON/BEIJING, Feb 4 (Reuters) - China on Tuesday
imposed targeted tariffs on American imports and put several
U.S. companies, including Google, on notice for possible
sanctions, in a measured response to the sweeping duties on
Chinese imports imposed by President Donald Trump.
        Beijing's limited counter to Trump's imposition of a 10%
tariff on all Chinese imports underscored the attempt by Chinese
policymakers to engage Trump in talks that could avert an
outright trade war between the world's two largest economies.
  
        Capital Economics, a U.K.-based research firm, estimated
that China's additional tariffs would apply to about $20 billion
of annual imports, compared with the $450 billion worth of
Chinese goods subject to the Trump tariff that took effect at 
12:01 a.m. ET on Tuesday (0501 GMT).
    "The measures are fairly modest, at least relative to US
moves, and have been calibrated to send a message to the US,"
Julian Evans-Pritchard, the firm's head of China Economics said
in a note.
        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. 
        Trump plans to speak to Chinese President Xi Jinping
later in the week, a White House spokesperson said.
  
        China's new measures, announced as the Trump tariff took
effect, include a 15% levy on U.S. coal and LNG and 10% for
crude oil, farm equipment and a small number of trucks as well
as big-engine sedans shipped to China from the United States.
    China said it was starting an anti-monopoly investigation
into Alphabet Inc's  GOOGL.O  Google. It put both PVH Corp
 PVH.N   the holding company for brands including Calvin Klein,
and U.S. biotechnology company Illumina  ILMN.O  on a list for
potential sanctions.
    
    EXPORT CONTROLS ON SOME METALS
    Separately, China said it was imposing export controls on
some metals, including tungsten, that are critical for
electronics, military equipment and solar panels.
    The 10%-duty China announced on electric trucks imported
from the United States could apply to Elon Musk's Cybertruck, a
niche offering Tesla  TSLA.O  has been promoting in China. Tesla
had no immediate comment.
    China's new tariffs will not take effect until Feb. 10,
giving Washington and Beijing some time to try and reach a deal
that Chinese policymakers have indicated they hope to strike
with Trump at a time when China's domestic demand has been
sputtering.
    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, the Australian
and Canadian dollars, as well as the Mexican peso all fell,
reflecting 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 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.
    "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 for tariffs, 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. 


 (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, Shri Navaratnam and Sharon Singleton)
 ((lincoln.feast@thomsonreuters.com; +61 478320778;))