Trump’s Latest Tariffs Face Fallout in APAC

February 6, 2025

President Donald Trump has reignited tensions with his largest trading partners by enacting sweeping tariffs on Chinese imports. Beginning on February 4, a 10% levy on all Chinese goods entering the U.S. took effect, prompting swift retaliation from Beijing. This development is part of a broader strategy by Trump to renegotiate trade agreements and reduce U.S. trade deficits with key partners.

China's Retaliatory Measures

In response to the U.S. tariffs, China has announced a 15% tariff on American coal and liquefied natural gas (LNG) and a 10% tax on crude oil, agricultural machinery, and U.S.-made large cars and pickup trucks. Beijing also introduced new export restrictions on rare earth minerals vital to the global tech industry, including tungsten, tellurium, and molybdenum. Additionally, two U.S. companies—PVH Group (owner of Tommy Hilfiger and Calvin Klein) and biotech firm Illumina—were placed on China’s “unreliable entity list.”

Chinese officials criticized the U.S. measures as violations of World Trade Organization (WTO) rules. A formal complaint has been filed with the WTO, signaling a prolonged legal and diplomatic dispute.

Tariff Delays with Canada and Mexico

Although tariffs on Chinese goods have gone into effect, the Trump administration delayed similar tariffs on imports from Canada and Mexico for 30 days after last-minute negotiations. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum secured temporary relief by pledging to strengthen their borders and increase efforts to combat drug trafficking, a key justification Trump cited for the tariffs.

However, Canadian leaders expressed frustration at the move, with Ontario Premier Doug Ford and federal officials announcing retaliatory measures. Canada is imposing its own tariffs on $30 billion worth of U.S. goods, including food, clothing, and business supplies. Meanwhile, Ontario and other provinces banned U.S. alcohol imports, impacting trade relations further.

Economic and Business Impact

The U.S. business community has expressed deep concerns over the economic impact of these tariffs. The U.S. Chamber of Commerce warned that the tariffs could disrupt supply chains and raise prices for American consumers. The Tax Foundation estimates that the new tariffs could cost U.S. households more than $830 in additional expenses this year and reduce the nation’s economic output by 0.4%.

Stock markets responded with sharp declines. The Dow Jones fell 1.3% on Monday, while the Nasdaq slid 1.6%. Major European and Asian stock indices, including Japan’s Nikkei 225 and South Korea’s KOSPI, also experienced losses. Cryptocurrencies, including Bitcoin and Ethereum, dropped significantly amid investor concerns about a prolonged trade war.

Political and Strategic Context

Trump defended the tariffs on social media, emphasizing his commitment to reshoring U.S. manufacturing. “MAKE YOUR PRODUCT IN THE USA AND THERE ARE NO TARIFFS!” he declared on Truth Social. He also hinted at expanding tariffs to European imports in the near future.

The administration has linked the tariffs to national security concerns, particularly the fight against the flow of fentanyl and other drugs into the U.S. Critics, however, note that only a small percentage of illegal fentanyl enters the U.S. through Canada. DEA data shows that most fentanyl seizures occur at the southern border with Mexico.

Global Reactions

In China, state-run media labeled the tariffs as “trade coercion” and dismissed them as ineffective in resolving the U.S. opioid crisis. European Commission President Ursula von der Leyen warned that Trump’s trade policies could escalate into a full-blown trade war, vowing that the EU would defend its economic interests.

In Canada, media outlets urged national unity in response to the U.S. measures. Editorials in major newspapers emphasized the need to stand firm against what they described as bullying tactics from the Trump administration.

What’s Next?

With China’s retaliatory tariffs set to take effect on February 10, tensions are expected to rise further unless both sides reach a compromise. Trump’s plans for additional tariffs on other trading partners remain unclear, but his administration has signaled that tougher measures could be forthcoming if current disputes are not resolved.

For now, businesses, consumers, and governments worldwide are bracing for the ripple effects of Trump’s latest trade policies.