China is set to impose retaliatory tariffs on a range of US products in a sign that Donald Trump’s tariffs could escalate into a global trade war.
US coal and liquefied natural gas will face 15 per cent tariffs from 10 February, while crude oil, agricultural machinery, large-displacement cars and pickup trucks will face 10 per cent duties.
The Chinese government also announced an anti-trust investigation into Google and put in place export controls on tungsten, tellurium, ruthenium, molybdenum and ruthenium-related items for national security reasons.
Kathleen Brooks, research director at XTB, said the tariffs were “not broad based, which suggests a conciliatory stance” towards the US.
The response came just hours after Trump imposed 10 tariffs on all goods coming from China.
“The unilateral imposition of tariffs by the US seriously violates the rules of the World Trade Organisation,” China’s finance ministry said. “It is not only unhelpful in solving its own problems, but also damages the normal economic and trade cooperation between China and the US.”
Trump said his actions were an attempt to stop the flow of fentanyl into the US, warning that the tariffs would move much higher if there was no action.
“China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” he said.
Jochen Stanzl, chief market Analyst at CMC Markets, said: “Investors are questioning whether Trump’s next move will lead to the sought-after compromise or ignite an unyielding trade war”.
The moves come after a volatile day in the global economy yesterday with investors trying to make sense of Trump’s tariff threats.
All goods from Mexico and Canada were set to face the introduction of 25 per cent tariffs on Monday, but both managed to secure a month-long delay following last ditch talks.
Mexican president Claudia Sheinbaum committed to send 10,000 troops to the US border while Justin Trudeau appointed a fentanyl czar, agreed to list cartels as terrorists and promised to “ensure 24/7 eyes on the border”.
“Some immediate concessions on the border issues have avoided immediate severe escalation, but Trump’s comments suggest that he will look to use the delay to leverage broader economic concessions,” Jim Reid, Deutsche Bank’s head of research, said.
Trump will be speaking to Xi Jinping later this week. Mohit Kumar, an analyst at Jefferies, said “today will be dominated by tariffs and whether a potential deal can be agreed with China.”