China has chosen to strike back and hit the United States with tariffs in response to the Trump administration’s 10% tax on Chinese goods. Beijing retaliated with duties, export controls, and an investigation into U.S. big tech.

Bloomberg reported that Beijing slapped a 15% tariff on U.S. coal and liquefied natural gas (LNG) exports, as well as a 10% levy on oil and farm equipment. This tit-for-tat tariff exchange has escalated trade tensions between the world’s largest economies. There were also new export controls on tungsten, tellurium, ruthenium, molybdenum, and ruthenium-related items.

China’s State Administration for Market Regulation announced a surprise probe into Google for violating the country’s anti-monopoly law. Chinese authorities also placed Calvin Klein owner PVH Corp. and U.S. gene sequencing company Illumina on a blacklist of entities that opens pathways to possible fines and/or other sanctions, such as trading halts and/or cancellation of work permits for foreign staff, according to a report by ZeroHedge. 

On Monday, White House Press Secretary Karoline Leavitt told Fox News that Trump plans to speak with Chinese President  Xi Jinping about “illegal Chinese fentanyl that is killing tens of thousands of Americans every single year.”

IKhoon Goh, head of Asia research at ANZ Banking Group, noted, “Unsurprisingly, a risk-off tone has taken hold of markets, with the yuan weakening and causing spillover into other Asian currencies. If there is no news of any deferral, we will see a further selloff in Asian asset markets, with the focus back on tomorrow’s fix.”

Rajeev De Mello, global macro portfolio manager at Gama Asset Management, commented on the Sino-U.S. trade war: “China will be forced to react though on its own terms and targeting specific sectors. Markets will be supported at lower levels by the expectation that market-friendly measures will be announced when China markets re-open after the Lunar New Year holidays.”

Donald Trump plans to make a deal with China’s President Xi at a later date. China’s trade retaliation has been relatively muted as Trump makes plans to speak with President Xi to “make a deal” and end the drug death crisis. Trump additionally warned that: “If we can’t make a deal with China, then the tariffs will be very, very substantial.”