Washington/Beijing – The escalating trade tensions between the United States and China reignited on Tuesday as Beijing swiftly imposed retaliatory tariffs following fresh U.S. duties on Chinese imports. The renewed trade conflict, driven by President Donald Trump's efforts to penalize China for failing to curb the flow of illicit drugs, signals another potential disruption to global markets and supply chains.
Tuesday, the U.S. implemented an additional 10% tariff on all Chinese imports, prompting an immediate response from Beijing. China's Finance Ministry announced new levies of 15% on U.S. coal and liquefied natural gas (LNG) and 10% on crude oil, farm equipment, and automobiles, effective February 10. Simultaneously, China’s Commerce Ministry introduced export controls on strategic metals such as tungsten, tellurium, ruthenium, and molybdenum, citing national security concerns. The move marks a significant escalation reminiscent of the 2018-2020 U.S.-China trade war, which saw tit-for-tat tariffs on billions of dollars worth of goods and deeply impacted global economic stability.
While Trump temporarily suspended planned 25% tariffs on Mexico and Canada, granting a 30-day reprieve in exchange for stricter enforcement on immigration and drug trafficking, no such leniency was extended to China. The White House confirmed that Trump would not engage in immediate talks with Chinese President Xi Jinping. Trump also warned of further tariff hikes unless Beijing took concrete action to stem the flow of fentanyl, a potent opioid contributing to the U.S. drug crisis. China has dismissed U.S. allegations, calling fentanyl an American domestic issue, and vowed to challenge the tariffs at the World Trade Organization (WTO) while leaving the door open for negotiations.
Trade Turmoil and Global Market Reactions
While the trade war deepens between Washington and Beijing, Mexico and Canada secured a temporary reprieve from Trump’s planned tariffs. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum agreed to strengthen border security and enhance cooperation in combating drug trafficking and organized crime. Mexico committed 10,000 National Guard troops to its northern border, while Canada pledged advanced border security measures and anti-money laundering initiatives. In return, the U.S. vowed to tighten arms trafficking restrictions to Mexico.
The diplomatic relief sparked positive market reactions, with the Canadian dollar rebounding from a two-decade low and U.S. stock index futures recovering after initial losses on Wall Street. Oil prices, which had surged on fears of trade disruptions, saw a decline following the Mexico-Canada deal. Industry groups across North America, particularly those reliant on cross-border trade, welcomed the pause, with analysts warning that a prolonged trade war could trigger recessionary effects in Canada and Mexico, while also leading to stagflation in the U.S.
Meanwhile, Trump hinted that his next trade target could be the European Union, though no specific timeline was provided. EU leaders, meeting in Brussels, signaled their readiness to retaliate if necessary, while urging negotiations to avoid another trade confrontation. Trump, however, suggested that Britain, post-Brexit, may be exempt from future tariffs.
Despite acknowledging that higher tariffs could lead to short-term economic pain for U.S. consumers, Trump defended his trade policies as necessary to curb immigration, fight drug trafficking, and revive American manufacturing. However, economic analysts warned that the tariffs, covering nearly half of all U.S. imports, would require a dramatic increase in domestic production, an unfeasible goal in the near term. As tensions escalate, global markets remain on edge, bracing for the economic fallout of a renewed U.S.-China trade war.
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