Beijing’s limited reply to Trump’s imposition of a 10% tariff on all Chinese imports underscored the attempt by Chinese policymakers to engage Trump in talks to avert an outright trade war between the world’s two largest economies.
“The measures are fairly modest, at least relative to US moves, and have been calibrated to send a message to the US,“ Julian Evans-Pritchard, the firm’s head of China Economics, said in a note.
Trump plans to speak to Chinese President Xi Jinping later in the week, a White House spokesperson said.
Ursula von der Leyen, head of the EU’s executive European Commission, said Brussels would be ready for tough negotiations but underlined the need to lay foundations for a stronger partnership with the EU’s largest trade and investment partner.
The European Commission and the new U.S. administration have been in contact at a technical level but Von der Leyen and Trump have not spoken directly yet, a Commission spokesperson said.
China said it was starting an anti-monopoly investigation into Alphabet Inc’s Google. It put PVH Corp the holding company for brands including Calvin Klein, and U.S. biotechnology company Illumina on a list for potential sanctions.
China said it was imposing export controls on some metals, including tungsten, that are critical for electronics, military equipment and solar panels.
China’s new tariffs will not take effect until Feb. 10, giving Washington and Beijing time to try to seek a deal that Chinese policymakers have indicated they hope to reach with Trump as China’s domestic demand sputters.
“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.
China has called fentanyl America’s problem and said it would challenge the tariffs at the World Trade Organization and take other countermeasures, while leaving the door open for talks.
Crude prices extended losses to tumble 2% after China’s retaliation, and stocks in Hong Kong pared gains. The dollar strengthened and the Chinese yuan, the euro, the Australian and Canadian dollars and Mexico’s peso fell, reflecting market concerns about the risk of a protracted global trade war.
There was relief in Ottawa and Mexico City after 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% tariffs due to take effect on Tuesday for 30 days.
“We believe through constructive engagement and discussion we can resolve this problem,“ he said.
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