On February 1, U.S. President Donald Trump signed executive orders imposing wide-ranging tariffs of up to 25% on goods imported from Canada, Mexico, and China, the country’s three biggest trading partners. Following last-minute talks with Mexico’s President Claudia Sheinbaum and Canada’s Prime Minister Justin Trudeau on February 3, President Trump agreed to postpone tariffs on goods from both countries for at least 30 days in exchange for both governments agreeing to increase security measures along their borders to stop the flow of drugs and illegal immigrants into the United States. According to Mexican authorities, the Trump Administration promised to stem the flow of weapons across the southern border as part of the agreement. Despite these postponements, across-the-board tariffs of 10% were still levied on all Chinese imports into the U.S. with effect from 00:01 Eastern time on February 4. On the same day, authorities in China announced a range of retaliatory measures targeting U.S. imports, the export of several critical metals and the Chinese business operations of three U.S.-based companies.
Given that products from Canada, Mexico, and China account for around a third of all imports into the U.S., the economic impact of President Trump’s proposed tariffs was expected to be widespread. While business impacts will likely be less severe following the postponement of tariffs on Canada and Mexico, impacts will still be felt in a range of sectors, particularly in those dependent on importing Chinese goods into the United States.
Chinese imports into the U.S. face universal 10% tariff from February 4
Despite growing political and economic tensions in recent years, China has remained the United States’ third biggest trading partner behind Canada and Mexico. According to the Office of the United States Trade Representative, goods and services trade with China was estimated at $758.4 billion (€733.4 billion), with imports accounting for $562.9 billion (544.4 billion) and exports accounting for $195.5 billion (€189.1 billion) in 2022.
In response to the latest U.S. tariffs, the Chinese Ministry of Finance announced on February 4 that it will impose tariffs of 15% on coal and liquefied natural gas as well as tariffs of 10% on crude oil, agricultural machinery and certain types of cars imported from the U.S., which will go into effect from February 10. While the tariffs will likely cause some impact on trade between the U.S. and China, the overall impact on U.S. export activities is expected to be limited. For example, according to data from the U.S. Energy Information Administration, LNG exports to China only accounted for around 2.3% of all U.S. LNG exports in 2023. The 15% tariffs are expected to affect less than $5 billion (€4.8 billion) worth of energy imports. China also reportedly imported fewer than a million cars in total from the U.S. in 2024. In total, the new tariffs could affect up to $20 billion (€ 19.2 billion) worth of U.S. imports into China, roughly 12% of all U.S. imports into the country.
Meanwhile, China’s Ministry of Commerce announced new export control measures on at least five metals and related technology, several of which are designated as critical minerals by the U.S. Geological Survey and thus considered essential for U.S. economic and national security. Affected metals include tungsten, tellurium, bismuth, molybdenum and indium. The metals are used in industries such as electronics, renewable energy, aerospace and defense. While export controls do not equal an outright ban, the measures could impede the supply of several critical materials, especially those whose global supply is dominated by China. For example, China accounts for around 81% and 80% of tungsten and bismuth supply respectively.
Lastly, several major U.S.-based companies have been targeted directly by Chinese authorities since the newest U.S. tariffs on Chinese goods went into effect. The Ministry of Commerce announced that it will place Illumina, Inc., a biotechnology company, and PVH Group, a fashion group that owns brands such as Calvin Klein and Tommy Hilfiger, on its unreliable entities list for allegedly violating market trading principles. Being put on the unreliable entities list could ban them from engaging in import and export activities and limit future investments in China. The State Administration for Market Regulation also confirmed on February 4 that it will investigate Google LLC for alleged violations of anti-monopoly regulations, although business impacts on Google LLC, which exited the Chinese market in 2010 following a dispute over censorship demands with the Chinese government, may be limited.
Governments of Canada and Mexico reach temporary agreement with U.S. Administration
Initially, tariffs of up to 25% on goods imported into the U.S. from Canada and Mexico, its two biggest trading partners, were also set to come into effect on February 4 before being postponed for at least 30 days following temporary agreements over border security issues. As the implementation deadline approached, Mexico’s President Claudia Sheinbaum reportedly instructed the country’s economy minister to prepare retaliatory measures, including tariffs of up to 25% on U.S. imports into Mexico as well as unspecified non-tariff measures, but did not specify which products would have been affected by retaliatory measures. Meanwhile, authorities in Canada had begun to set a plan in motion that could have seen tariffs imposed on U.S. products worth around C$155 billion ($106.6 billion / €86 billion) before President Trump and Prime Minister Trudeau agreed on delaying the implementation of their respective tariffs. In a first step, Canada’s Department of Finance had published a list of U.S. products worth around C$30 billion ($20.1 billion / €20.9 billion) on February 3 that would have faced 25% tariffs from February 4. Affected products included certain types of live poultry, milk and cream products, vegetables and fruits, spices, beverages, meat and other food and consumer products.
U.S. trade relations with Canada, Mexico and China set to remain tense
Although the extent of China’s retaliatory trade measures is considered somewhat measured by many experts, it underlines the country’s willingness and ability to disrupt the supply of key minerals to the U.S. as well as disrupt the operations of major U.S.-based companies with business ties in China. As of February 4, it remains unclear whether these newly announced tariffs will end up going into effect as recent statements claim that President Trump is planning to speak with China’s President Xi Jinping in the coming days, a move that seems reminiscent of his actions just before the temporary pause on tariffs on Canadian and Mexican imports was announced. Meanwhile, U.S. relations with Canada and Mexico are also set to remain tense in the coming weeks, despite the temporary postponement of tariffs, as it remains unclear what President Trump would be willing to do if he gets the impression that the authorities in either country do not meet his border security-related demands.
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