China on Tuesday slapped tariffs on US imports in a rapid response to new US duties on Chinese goods, renewing a trade war between the world’s top two economies as President Donald Trump sought to punish China for not halting the flow of illicit drugs.

Trump on Monday suspended his threat of 25pc 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. Trump’s additional 10 per cent tariff across all Chinese imports into the US came into effect at 12:01am ET on Tuesday (10:01am PKT).

Within minutes, China’s Finance Ministry said it would impose levies of 15pc for US coal and LNG and 10pc 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, ruthenium, molybdenum and ruthenium-related items to “safeguard national security interests”.

“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.

A White House spokesperson said Trump would not be speaking with Chinese President Xi Jinping until later in the week.

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 $361bn, according to Chinese customs data released last month.

Trump warned he might increase tariffs on China further unless Beijing stemmed the flow of fentanyl, a deadly opioid, into the United States.

“China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” he said on Monday.

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.

China says to probe Google over anti-monopoly violations

After Washington slapped 10pc levies on Chinese goods, China said it would probe US tech giant Google over violations of anti-monopoly laws.

Beijing’s State Administration for Market Regulation said the US tech giant was “suspected of violating the Anti-Monopoly Law of the People’s Republic of China”.

It has “launched an investigation into Google in accordance with the law” as a result, the administration said in a statement.

Beijing also said it would add US fashion group PVH Corporation — which owns Tommy Hilfiger and Calvin Klein — and biotech giant Illumina to a list of “unreliable entities”.

The move would “safeguard national sovereignty, security and development interests, in accordance with relevant laws”, China’s commerce ministry said in a statement.

“The above two entities violate normal market transaction principles, interrupt normal transactions with Chinese enterprises, and take discriminatory measures against Chinese enterprises,” it added.

China in September said it was investigating PVH for “unreasonably boycotting” cotton from its Xinjiang region, where Beijing is accused of widespread rights violations.

Neighbourly deals

There was relief in Ottawa and Mexico City, as well as global financial markets, after the deals to avert the hefty tariffs on Canada and Mexico.

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 25pc 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.

After speaking by phone with both leaders, Trump said he would try to negotiate economic agreements over the coming month with the two largest US trading partners, whose economies have become tightly intertwined with the United States since a landmark free-trade deal was struck in the 1990s.

The latest twist in the saga sent the Canadian dollar soaring 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 hinted that Britain, which left the EU in 2020, might be spared tariffs.

Trump acknowledged over the weekend that his tariffs could cause some short-term pain for US consumers, but says they are needed to curb immigration and narcotics trafficking and spur domestic industries.

The tariffs as originally planned would cover almost half of all US imports and 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.