The trade war between the US and China resumed on Tuesday after Beijing announced retaliatory levies on US imports after Donald Trump imposed 10 per cent duty on Chinese goods.
China said it would impose tariffs of 15 per cent on coal, LNG and 10 per cent on crude oil and farm equipment as soon as Mr Trump's additional tariff across Chinese imports came into effect.
The tariffs on targeted US exports come into effect on 10 February, which leaves enough time for Washington and Beijing to reach a deal in an effort to avoid a long-drawn trade war akin to the one during Mr Trump's first presidency.
China had urged Mr Trump against imposing additional tariffs on an estimated $400bn (£322bn) in goods that Washington purchases from Beijing annually, urging dialogue while vowing to impose “countermeasures” if the US president went ahead.
The last time Mr Trump initiated a two-year trade war with China over massive trade surplus in 2018, it sent the world economy into a tizzy as the global supply chain suffered due to tit-for-tat tariffs on hundreds of billions of dollars worth of goods.
In July 2018, the US unveiled plans for 10 per cent tariffs on $200bn (£161bn) of Chinese imports, which a month later was increased to 25 per cent.
In August 2018, Mr Trump imposed 25 per cent duties on around $34bn(£27bn) of imports such as cars and aircraft parts on China. The Xi Jinping government shot back by imposing 25 per cent tariff on more than 500 imports from the US worth the same amount.
Mr Trump, by the end of August, imposed another 25 per cent tariff on about $16bn (£12bn) more on Chinese goods, to which China responded by announcing 25 per cent levies on bourbon, orange juice, and Harley-Davidson motorbikes.
The 10 per cent tariffs on $200bn (£161bn) of Chinese imports kicked in late September, with the aim to increase it to 25 per cent from 1 January 2019. China taxed $60bn (£48) of US goods.
The US and China, on 1 December 2019, agreed on a 90-day halt to new tariffs as Mr Trump agreed to postpone the 1 January duty hike. As months of trade talks fell apart, it led Mr Trump to announce a 10 per cent tariff on $300bn (£241bn) worth of Chinese imports.
China ended the row in 2020 by agreeing to spend an extra $200bn (£161bn) a year on US goods, but the plan was derailed by the Covid-19 pandemic and its annual trade deficit has since widened to $361bn (£291bn), according to Chinese customs data released last month.
Mr Trump on Monday paused the 25 per cent tariffs on imports from Canada on Mexico but continued with the measures on China citing the fentanyl crisis.
"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.
"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.
Mr 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.
Mr Trump hinted that Britain, which left the EU in 2020, might be spared tariffs.
