WASHINGTON/BEIJING, Feb 4 (Reuters) - China imposed targeted tariffs on American imports on Tuesday and issued warnings to several U.S. companies, including Google, regarding possible sanctions, as a measured response to the broad tariffs on Chinese imports recently implemented.
Beijing's restrained reply to Trump's introduction of a 10% tariff on all Chinese imports highlighted Chinese policymakers' efforts to initiate discussions with Trump to prevent a full-blown trade war between the two largest economies globally.
According to Capital Economics, a U.K.-based research firm, China's additional tariffs are estimated to affect around $20 billion in annual imports, in contrast to the $450 billion worth of Chinese goods subject to the Trump tariff that came into effect at 12:01 a.m. ET on Tuesday (0501 GMT).
The measures are quite modest compared to U.S. actions, and have been carefully designed to convey a message to the U.S., noted Julian Evans-Pritchard, the firm's head of China Economics.
Trump decided at the last minute on Monday to impose 25% tariffs on Mexico and Canada, agreeing to a 30-day pause in exchange for concessions on border and crime control.
A White House spokesperson confirmed that Trump plans to communicate with Chinese President Xi Jinping later in the week.
Hinting on Sunday that the European Union might be the next target for tariffs, Trump refrained from specifying a timeline.
Ursula von der Leyen, head of the EU's executive European Commission, expressed readiness for tough negotiations while emphasizing the necessity of establishing a solid foundation for a stronger partnership with the EU's largest trade and investment partner.
We will approach this openly and pragmatically. However, we will also assert our interests whenever necessary, she stated in a speech.
The European Commission and the new U.S. administration have engaged at a technical level, but Von der Leyen and Trump have yet to speak directly, according to a Commission spokesperson.
China's latest measures, revealed as the Trump tariff went into effect, included a 15% tariff on U.S. coal and LNG, and a 10% duty on crude oil, farm equipment, a limited number of trucks, as well as large-engine sedans shipped from the U.S. to China.
China announced an investigation into Alphabet Inc's Google and placed PVH Corp, the parent company of brands like Calvin Klein, and U.S. biotechnology firm Illumina on a watch list for potential sanctions.
Google declined to comment on the probe, while PVH and Illumina did not respond to requests for comment outside normal U.S. business hours.
China disclosed that it would impose export controls on certain rare earth minerals crucial for electronics, military gear, and solar panels.
The 10% levy announced by China on electric trucks imported from the U.S. could impact Elon Musk's Cybertruck, a specialized product Tesla has been promoting in China. Tesla had no immediate response.
China's new tariffs are set to come into effect on Feb. 10, offering time for Washington and Beijing to pursue a resolution to the escalating situation amid China's economic slowdown.
Trump instigated a two-year trade war with China in his first presidential term, aimed at addressing China's trade surplus with the U.S., resulting in disruptive tit-for-tat tariffs that disrupted global supply chains and harmed the global economy.
Oxford Economics pointed out that the trade war is in its initial phases, increasing the likelihood of additional tariffs as they revised down their economic growth forecast for China.
Trump indicated a willingness to escalate tariffs against China unless Beijing acts to halt the flow of fentanyl, a harmful opioid, into the U.S.
China views fentanyl as an issue for America, expressing its intent to challenge the tariffs at the World Trade Organization and take countermeasures, while remaining open to discussions.
Although the U.S. is a minor crude oil provider for China, accounting for 1.7% of its imports last year, valued at around $6 billion, over 5% of China's LNG imports originate from the U.S.
Following China's retaliatory actions, crude prices dipped, Hong Kong stocks fluctuated, and various currencies such as the Chinese yuan, the euro, the Australian and Canadian dollars, and Mexico's peso weakened, reflecting concerns in the market about the potential ramifications of an extended global trade dispute.
Even if the U.S. and China can find common ground on some issues, the recurrence of tariffs could introduce significant market volatility this year, emphasized Gary Ng, senior economist at Natixis in Hong Kong.
Ottawa and Mexico City experienced relief after Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced an agreement to enhance border enforcement, leading to a 30-day pause in the 25% tariffs scheduled to come into effect.
The EU trade chief expressed a desire for early discussions with the U.S. to prevent potential tariffs.
We believe that through constructive engagement and dialogue, we can resolve this issue, he stated.