China hits back with tariffs on US goods

Within minutes, China's Finance Ministry said it would impose levies of 15 per cent for US coal and LNG and 10 per cent for crude oil, farm equipment and some autos. The new tariffs on US exports will start on February 10, the ministry said.

Separately, China's Commerce Ministry and its Customs Administration said the country is imposing export controls on tungsten, tellurium and molybdenum to "safeguard national security interests".

Trump on Monday suspended his threat of 25 per cent 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.

But there was no such reprieve for China, and a White House spokesperson said Trump would not be speaking with Chinese President Xi Jinping until later in the week.

US President Donald Trump warned that the EU is next in the firing line on tariffs. (AP PHOTO)

During his first term in 2018, Trump initiated a brutal two-year trade war with China over its massive US 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.

To end that trade war, China agreed in 2020 to spend an extra $200 billion a year on US goods but the plan was derailed by the COVID pandemic and its annual trade deficit had widened to $361 billion, according to Chinese customs data released last month.

"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 has called fentanyl America's problem and said it would challenge the tariffs at the World Trade Organisation and take other countermeasures, but also left the door open for talks.

Canada and Mexico won a reprieve from the new tariffs, in return for increased border control. (AP PHOTO)

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 per cent 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.

The United States also made a commitment to prevent trafficking of high-powered weapons to Mexico, Sheinbaum said.

"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.

The Canadian dollar earlier soared after slumping to its lowest in more than two decades. The news also gave US stock index futures a lift after a day of losses on Wall Street, and sent oil prices lower.

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 US imposes tariffs, but also called for reason and negotiation. The US is the EU's largest trade and investment partner.

Trump acknowledged over the weekend that his tariffs could cause some short-term pain for US consumers.

The tariffs as originally planned would require the United States to more than double its own manufacturing output to cover the gap - an unfeasible task in the near term, ING analysts wrote.

Other analysts said the tariffs could throw Canada and Mexico into recession and trigger "stagflation" - high inflation, stagnant growth and elevated unemployment - at home.