The U.S. and China have reignited their trade war after President Donald Trump imposed a 10% tariff on all Chinese imports, prompting swift retaliation from Beijing.
At 12:01 a.m. ET on Tuesday, Trump’s tariffs took effect, targeting Chinese goods in an effort to pressure Beijing to curb the flow of illicit fentanyl into the U.S. Within minutes, China’s Finance Ministry responded with its own tariffs—15% on U.S. coal and liquefied natural gas (LNG), and 10% on crude oil, farm equipment, and some automobiles, effective February 10.
In addition, China launched an anti-monopoly investigation into Alphabet Inc.’s Google and added PVH Corp (owner of Calvin Klein) and biotechnology firm Illumina to its “unreliable entities list.” Beijing also imposed export controls on rare earth elements crucial to clean energy production, citing national security concerns.
Trump, who previously led a bruising two-year trade war with China in 2018, warned that further tariffs could follow unless Beijing takes action on fentanyl trafficking. China, in turn, vowed to challenge the tariffs at the World Trade Organization while leaving the door open for negotiations.
Relief for Canada and Mexico
While tensions with China escalated, Trump suspended a planned 25% tariff on Mexico and Canada for 30 days after both countries agreed to strengthen border security and crack down on drug smuggling. Canada pledged to deploy new technology and personnel to combat fentanyl trafficking, while Mexico committed 10,000 National Guard troops to secure its northern border.
Both Canadian and Mexican officials welcomed the pause, as industry groups feared severe economic disruption. Meanwhile, Trump hinted that the European Union could be his next trade target, though he suggested that Britain might be exempt.
With global markets reacting to the uncertainty, analysts warn that the renewed trade war could trigger economic slowdowns in multiple regions, with potential inflationary effects in the U.S. and recession risks for Canada and Mexico.
