• US President Donald Trump says the US has achieved a “total reset” in relations with China after both countries agreed to reduce tariffs on each other’s goods for 90 days
• US markets have surged after the deal between Washington and Beijing, a major de-escalation in their trade war
• Markets in the US are now trading at similar levels to the beginning of the year, our New York business reporter Natalie Sherman writes – marking a significant recovery since Trump announced his “Liberation Day” tariffs in April
• US tariffs on Chinese imports will fall from 145% to 30%, while Chinese tariffs on US goods will fall from 125% to 10%
• It is a bigger cut than expected, writes our correspondent Theo Leggett – but 30% is still a high tariff

Stocks jumping for companies with Chinese imports

Bob Doll, chief executive of Crossmark Global Investment, has been speaking to Michelle Fleury on Opening Bell about the stock market, where shares in companies that bring in goods from China are, unsurprisingly, surging.

Shares in Target, for example, have jumped more than 5%, while Nike is up more than 8%.

Oil prices and the dollar have risen too.

Despite the optimism on Wall Street this morning, Doll says the announcement does not completely clear up economic risks.

Businesses and households have had their confidence shaken, and the rise in tariff rates remains significant. Even the reduced 30% tariff rate could drive exports from China to the US down by more than a third, according to Macquarie Bank.

“From Liberation Day to now, uncertainty levels have moved up a lot and getting through that is not going to be simple,” Doll says. “My guess is, it’s not going to be a straight line up.”

Trump says he will ‘equalise’ drug prices between US and world

In addition to speaking on the tariff pause with China, Trump has been laying out his plans to reduce US drug prices and bring them in line with the rest of the world.

After explaining the vast differences in pharmaceutical prices that US patients pay compared to their counterparts in the UK, EU and other developed countries, he says “what we’re doing is equalising”.

He adds: “We’re all going to pay the same, we’re going to pay what Europe is going to pay.”

Trump also claims the US is going to pay the lowest price in the world, so “we’re no longer paying 10 times more than another country.”

US-China relations are ‘very good’ – Trumppublished at 16:1616:16

We can bring you a bit more now on Trump’s initial comments at the White House. He describes the relationship between the US and China as “very good”.

“We’re not looking to hurt China,” he says, adding that China was “being hurt very badly”.

“They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.”

Trump goes on to say that his administration made a “great trade deal” with China, which was “a much bigger deal originally, and then they cancelled it right on the last day.”

As a reminder, the US will still apply a 30% tariff on Chinese goods during the 90-day pause agreed to by the two countries. US goods face a 10% tariff in China.

Trump says China has agreed to stop sending fentanyl to US

Trump says he’s charging China a 20% tariff rate “for the fact that they send fentanyl” into the US.

“And they’ve agreed they’re going to stop that,” Trump says.

He adds that “they’ll be rewarded by not having to pay … hundreds of billions of dollars in tariffs.”

China is the primary source of the precursor chemicals used to produce fentanyl, which killed over 74,000 Americans in 2023 after taking drug mixtures containing fentanyl, according to the US Centers for Disease Control (CDC), external.

Trump says ‘total reset’ reached with China after escalating trade war

Trump says his administration has achieved a “total reset with China” with the latest agreement, after weeks of an escalating trade war.

“The best part of the deal”, Trump adds, is that “China agreed to open itself up to American business”.

Trump adds the US has “opened” itself to Chinese imports but that “they didn’t open their country to us”.

“It never made sense to me. It’s not fair,” Trump says.

He also says China will “suspend and remove all of its non-monetary [trade] barriers”, but says that the deal still needs to be signed.

Trump says he will speak to Xi Jinping ‘maybe at the end of the week’

US President Donald Trump is now speaking at the White House.

Commenting on further negotiations related to the tariff agreement with China, Trump says he will speak to Chinese President Xi Jinping “maybe at the end of the week”.

We’ll bring you the key lines in our next few posts – you can also follow along by clicking Watch live at the top of the page.

Tariffs? What tariffs?

The stock market in the US is soaring this morning, a reflection of the outcome of US-China trade talks over the weekend, which yielded a much more significant drop in tariffs than many analysts had expected.

The S&P 500 is up roughly 2.6%, the Dow by about 2.5% and the Nasdaq by more than 3.3%.

The market had already recovered significant ground since 2 April, when Trump’s “Liberation Day” tariffs sparked turmoil.

In the US, the stock indexes are now trading at levels close to where they started the year.

US markets surge following US-China agreement

The bell has sounded on Wall Street and trading in the world’s biggest economy is now open.

Here’s where the three main indexes are on opening:

• S&P 500 – up 2.6%

• Nasdaq – up 3.3%
• Dow Jones – up 2.5%

Chinese companies expect more tariff changes

Companies in China are preparing for more tariffs down the line, despite the 90-day pause announced earlier today.

“To be honest, many Chinese companies no longer believe that tariffs will remain unchanged. For businesses, the best they can do is build a moat around their company before the next round of tariffs arrives,” said Elaine Li, head of Greater China at Atlas Ways, which offers services for Chinese enterprises’ global development.

Elaine Li told BBC Chinese that for many Chinese exporters, the latest tariff reductions are only temporary.

The rapid changes in tariffs led them to a more diversified global strategy, and they have already moved from getting orders passively to exploring international markets proactively. “It’s hard to wake someone who’s pretending to sleep, but it’s even harder to put someone to sleep when has just awakened.”

Uncertainty remains, says EU Chamber of Commerce in China

Reacting to the 90-day pause in US-China tariffs, the European Chamber of Commerce in China says while it’s “encouraged by the decision, uncertainty remains”.

“This is partly because certain tariffs have only been suspended for 90 days, and partly because of the erratic nature in which these tariffs were implemented in the first place,” it says in a statement.

It says it hopes to see both sides continue to engage in dialogue to “resolve differences, and avoid taking measures that will disrupt global trade and result in collateral damage for those caught in the cross-fire”.

‘Trump caves on China’, says Democratic lawmaker

California congressman Eric Swalwell, a Democrat, welcomed the Trump administration’s US-China trade agreement but still snuck in a diss.

“Just like I TOLD YOU. Trump caves on China,” Swalwell wrote on X, re-posting a previous post of his from April that said “Trump will cave on tariffs”.

He attributed the temporary reduction in tariffs to pressure from Democrats, without going into detail.

“Thank you! YOU went to the town halls and town squares. WE did this,” he says.

Earlier, US Treasury Secretary Scott Bessent announced that both China and the US would lower their reciprocal tariffs by 115 percentage points for 90 days from 14 May, after the two countries held talks in Switzerland at the weekend.

US stock markets to open shortly

In just under an hour, US stock markets will open, and our business editor Simon Jack says the S&P 500 is expected to open above the level it was the day before Trump’s “Liberation Day”.

As we reported earlier, global stock markets have welcomed news of the agreement between the US and China to pause tariffs for 90 days.

Hong Kong’s benchmark Hang Seng Index was still trading when the announcement was made, and jumped on the news, ending the day up 3%.

European stock markets also saw a boost following the announcement.

We’ll bring you the latest once trading in the US is under way.

Chinese exporter welcomes ‘pleasant surprise’ of US-China deal

“I’m glad sanity is back in style,” says Tat Kei, a Chinese exporter of personal care appliances to the US, whose factory employs 200 people in Shenzhen.

However, with the US still placing a 30% import tax on items arriving from China, he says prices will still rise for US customers, despite the tariffs truce.

Tat Kei’s still looking to move some production to south-east Asia.

“President Trump is going to be here for the next 3.5 years. I don’t think this is going to be the end of it…not by a long shot,” he says.

Tat Kei earlier spoke to the BBC World Service’s Business Dailyprogramme when the US and China were still engaging in tit-for-tat tariffs and most US-bound orders at his factories were cancelled.

White House says deal is ‘an extraordinary first step’

White House Press Secretary Karoline Leavitt tells Fox News that the latest US-China agreement on trade was “an extraordinary first step in the right direction”.

China also agreed to “continue having discussions” about further opening its market to US products and goods, Leavitt says, and to “continue seriously discussing the grave impact that Chinese produced fentanyl is having” in the US.

“President Trump will continue negotiations with China, so we can hopefully, inevitably get to a fair and comprehensive, big trade deal,” she adds.

US-China deal is full steam ahead for shipping companies

This weekend’s trade agreement between the US and China is certainly good news for shipping companies.

Remember, about 90% of global trade is moved by sea. Everything from clothes and toys to furniture and cars.

The extraordinary tariffs had led to a collapse in the amount of goods being moved across the Pacific Ocean but investors sense that will rebound and that will mean more profits.

Just two of the world’s five biggest shipping companies are traded on stock markets.

And the direction of travel is clear, five hours into the European trading day Denmark’s Maersk is up more than 11.5% whilst Germany’s Hapag-Lloyd is up more than 13.5%.

Both companies have welcomed the agreement with Maersk earlier saying “we hope it can lay the foundation for the parties to also reach a permanent deal that can create the long-term predictability our customers need”.

Meanwhile Hapag-Lloyd says its now expecting an increase in bookings on sailings from China to the US and that might mean it uses larger ships than it had otherwise planned.

How did we get here?

For those of you not steeped in global trade policy, here’s a brief timeline of the events that led up to the 90-day pause in tariffs between the US and China:

• 1 February: US President Donald Trump announces a 10% tariff rate on almost all Chinese goods entering the US
• 4 February:China responds with various tariffs of 10-15% on certain US products
• 4 March: Trump doubles the tariff rate on Chinese goods to 20%
• 2 April:The US announces a further 34% tariff rate on Chinese imports, bringing the total to 54%. China responds with a 34% tariff on most US goods
• 9 April: China says it will impose 84% tariffs on US goods from 10 April, up from 34%. Trump’s “reciprocal” tariffs come into force, with China’s tariffs revised to 84% – bringing the total to 104%. Trump later says tariffs on China will go up to 125%, which brings the total including the levy from February up to 145%
• 11 April: Beijing increases its tariffs on goods from the US up to 125% and says it won’t respond to further increases
• 12 May: The US and China announce a 90-day pause on “reciprocal” tariffs starting 14 May after holding trade talks in Switzerland. It will bring US tariffs on Chinese imports down from 145% to 30%, and Chinese tariffs on US goods will fall from 125% to 10%

What could the tariff deal mean for TikTok?

You may recall a law last year ordering TikTok’s Chinese parent company ByteDance to sell the app or see it banned in the US.

Since then President Trump has extended the deadline twice to June 2025, leaving everyone wondering what is actually going on.

The Chinese government would likely need to approve such a sale – which means it’s inevitable such a big sticking point between the US and China might have gotten muddled up in the trade talks.

Trump told NBC News in May there were people ready to buy the app – but his tariffs had limited China’s ability to do business with the US.

He said he believed TikTok would be a “very easy subject to solve” in a tariff deal.

So a 90 day pause on tariffs – and pledges to continue trade discussions – may help secure a TikTok sale.

US-China deal leaves Beijing ‘psychologically stronger’, says analyst

Despite the US and China calling this a joint agreement, people in Beijing will interpret it as the Trump administration walking back from the tariffs, says Janka Oertel, director of the Asia programme at the European Council on Foreign Relations.

“We are back to square one, now negotiating can begin. The outcome is uncertain but China is in a psychologically stronger position now than before,” Oertel says.

However, Oertel says “it’s not really a deal yet” without seeing details on fresh commitments from Beijing on key issues like market access or expanded imports of US goods.

What does this truce suggest about the future strategy of US tariffs?

That’s a question many will be pondering this morning as everyone digests the truce announcement between the world’s two biggest economies.

Economists at Deutsche Bank have suggested the lowering of tariffs, and last week’s UK-US deal on them, means there’s both “a likely cap and floor” to Trump’s rates of 10 to 30%.

“The UK has one of the least imbalanced relationships with the US and now has a universal tariff rate of 10%. China has one of the most imbalanced relationships and now has a tariff rate of 30,” says George Saravelos, head of FX research at the investment bank.

“It is reasonable that these two numbers now set the bounds of where American tariffs will end up this year, a material increase in visibility from just last week.”

The trading bloc was set to impose duties on US products, including a 50% levy on whiskey, from 1 April to which Trump then responded with a 200% alcohol tariff threat.

In a move that could calm the dispute, the EU said on Thursday it would push back its tariffs, saying it wanted “additional time for discussions” with the US.

It comes as global leaders try to respond to the White House’s trade threats, including looming “reciprocal” tariffs Trump has promised to announce on 2 April.

Over the last week, leaders in France and Italy – home to many wine exporters who would be affected if Trump carried out his threat – have criticised the EU for its escalation in response to Trump.

The EU had initially said its tariffs would unfold in two phases, with a first set of duties coming into force on 1 April and a second round on 13 April.

EU Spokesperson Olof Gill said on Thursday delaying the first round of US tariffs until 13 April was “a slight adjustment to the timeline and does not diminish the impact of our response”.

He said officials planned to consult with EU members on the items from the US that will be targeted.

“In the meantime, the EU continues to be ready to engage in constructive dialogue with the US, in order to seek a solution that avoids unnecessary harm to both economies,” he said.

He declined to say if the EU had made any headway discussing the issue after reaching out to the Trump administration.

Distilled Spirits Council president Chris Swonger, who represents US alcohol-makers in the US, welcomed the EU’s tariff delay.

“This is a very positive development and gives US distillers a glimmer of hope that a devastating 50% tariff on American whiskey can be averted,” he said, urging the two sides to reach an agreement that would preserve “zero-for-zero” tariffs for the spirits trade.

The White House is in the middle of preparing to announce another round of tariffs on countries around the world, with the EU expected to be one of the major trading partners affected.

While it remains unclear how the duties will be set, Trump has talked up the plans for the tariffs, which he says are aimed at countries that have trade practices that hurt US exports.

White House officials have made clear that the EU will be a target, with Trump floating a plan for a 25% tariff on all European products earlier this year.

Though the EU’s average tariffs are not much higher than those imposed by the US, the US has long complained about other kinds of rules, such as those barring trace levels of pesticides, that they say put American products at a disadvantage.

It’s an extraordinary result for a man with very little political experience. He has never been elected as an MP, let alone served in a cabinet post.

What Carney does have though – as Governor of the Bank of Canada during the global financial crisis and Governor of the Bank of England during the Brexit negotiations – is a long track record in global finance during times of economic turbulence.

And at a moment like this, Carney has been arguing, that could prove invaluable.

Politics in this country has been turned on its head as a result of what’s happening south of the border, with US President Donald Trump launching a trade war and threatening to make Canada the 51st state of America.

Addressing a crowd of Liberal supporters after the result of the leadership contest was announced on Sunday evening, Carney promised to face down the threats from Trump, over the tariffs and the claims on Canada’s sovereignty.

“Canada never, ever, will be part of America in any way, shape or form,” he said. “We didn’t ask for this fight, but Canadians are always ready when someone else drops the gloves.

“Americans should make no mistake”, he warned. “In trade, as in hockey, Canada will win.”

He repeatedly referred to the US president by name and said his government would keep retaliatory tariffs in place until “America shows us respect”.

How he will translate his strong language on the stage in Ottawa into practical solutions to those twin challenges was, however, far less clear.

Liberals might hope that Trudeau’s exit from the stage will, in itself, help clear the air.

Instead of the frequent mocking of Trudeau by Trump as a “weak” leader, they might dare to believe that Carney will at least be able to reset the personal chemistry.

On the other hand, if he has to push hard in an attempt to win concessions, will he also risk incurring the wrath of a man who uses unpredictability as a political art form?

Much of that will depend on how serious the US president is in his insistence that he wants to impose real economic pain on Canada and annex its territory.

And that’s a hard question to answer.

After Carney had accepted the party’s nomination, I caught up with former Canadian Prime Minister, Jean Chretien, who served for a decade from 1993 and who’d taken to the stage earlier in the evening.

Did he think Trump was being serious?

“You know, I don’t know,” he told me. “Do you know? Does anyone know? I’m not a medical doctor or a psychiatrist. He changes his mind every two or three hours. So [for him] to be leader of the free world, it is preoccupying for everybody.”

While the US threat is dominating Canadian politics – Carney described the current situation as “dark days brought on by a country we can no longer trust” – there are still domestic political matters to focus on too, not least the prospect of a general election.

Once sworn in as prime minister in the coming days, Carney will have to decide whether to call a snap election. If he doesn’t, the opposition parties in parliament could force one later this month through a no-confidence vote.

Before Trudeau said he was stepping down, the Liberal Party was facing electoral oblivion.

After nine years in power, he’d become a liability and a lightning rod for public anger over the rising cost of living despite record levels of government spending and a ballooning national debt.

The stage appeared to be set for the Liberals to be swept from power by a Conservative Party under the stewardship of the young, populist leader Pierre Poilievre, who had turned lambasting Trudeau into something of a sport.

Now, not only has he lost the advantage of a deeply unpopular opponent, his political style is at risk of appearing out of step. In the current environment, even a loose alignment with the politics of Trump is a potential liability with Canadian voters.

The Republican president, for his part, recently said Canada’s Conservative leader was not Maga enough.

The Liberal Party is suddenly feeling a sense of rejuvenation – the gap in the opinion polls with the Conservatives, once a gulf, has narrowed dramatically. And you could feel that palpable sense of optimism in the room on Sunday evening.

Aware of the danger, Poilievre accused Liberals of “trying to trick Canadians” to elect them to a fourth term. But his statement also highlighted how Trump is changing the political messaging on this side of the border.

“It is the same Liberal team that drove up taxes, housing costs, and food prices, while Carney personally profited from moving billions of dollars and thousands of jobs out of Canada to the United States,” Poilievre wrote.

“We need a new Conservative government that will put Canada First – for a change.”

Trump’s election has led Canada to rally to round its flag and has propelled a former central bank governor – an archetypal member of the country’s political elite – to the highest office in the land.

The Conservatives may still lead in the polls, but for the first time in a long time, the Liberals believe that, under Carney, they have a fighting chance again.

The world’s top two economies have edged closer to a trade war after Trump slapped more tariffs on all Chinese goods. China quickly retaliated imposing between 10-15% tariffs on American farm products.

The Chinese embassy in Washington, in a post on X, said: “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”

It is some of the strongest rhetoric so far from China since Trump became president and comes as the county’s top leaders gathered in Beijing for the opening of the annual National People’s Congress.

On Wednesday, China’s Premier Li Qiang announced that China would again boost its defence spending by 7.2% this year and warned that “changes unseen in a century were unfolding across the world at a faster pace.” This increase was expected and matches the figure announced last year.

Leaders in Beijing are trying to send a message to people in China that they are confident the country’s economy can grow, even with the threat of a trade war.

China has been keen to portray an image of being a stable, peaceful country in contrast to the US, which Beijing accuses of being embroiled in wars in the Middle East and Ukraine.

China may also hope to capitalise on Trump’s actions relating to US allies such as Canada and Mexico, which have also been hit by tariffs, and will not want to ramp up the rhetoric too far to scare off potential new global partners.

The Premier’s speech in Beijing on Tuesday emphasised that China would continue to open up and hoped to attract more foreign investment.

China has, in the past emphasised that it is ready to go to war. Last October, President Xi called for troops to strengthen their preparedness for war as they held military drills around the self-governing island of Taiwan. But there is a difference between military preparedness and a readiness to go to war.

The Chinese embassy in Washington’s post quoted a foreign ministry statement from the previous day, which accused the US of blaming China for the influx of the drug fentanyl

“The fentanyl issue is a flimsy excuse to raise US tariffs on Chinese imports,” the foreign ministry spokesperson said.

“Intimidation does not scare us. Bullying does not work on us. Pressuring, coercion or threats are not the right way of dealing with China,” he added.

The US-China relationship is always one of the most contentious in the world. This post on X has been widely shared and could be used by the China hawks in Trump’s cabinet as evidence that Beijing is Washington’s biggest foreign policy and economic threat.

Officials in Beijing had been hopeful that US–China relations under Trump could get off to a more cordial start after he invited Xi to his inauguration. Trump also said the two leaders had “a great phone call” just a few days before he entered the White House.

There were reports that the two leaders were due to have another call last month. That did not happen.

Xi had already been battling persistently low consumption, a property crisis and unemployment.

China has pledged to pump billions of dollars into its ailing economy and its leaders unveiled the plan as thousands of delegates attend the National People’s Congress, a rubber-stamp parliament, which passes decisions already made behind closed doors.

China has the world’s second-largest military budget at $245bn but it is far smaller than that of the US. Beijing spends 1.6% of GDP on its military, far less than the US or Russia, according to the Stockholm International Peace Research Institute.

However, analysts believe China downplays how much it spends on defence.

The counter-measures include a 15% tax on coal and liquefied natural gas imports from the US, while crude oil, agricultural machinery, pickup trucks and large-engine cars will face a 10% tariff. These are expected to come into force next Monday.

China has complained to the World Trade Organization (WTO) – accusing the US of breaking international rules.

Trump says the tariffs are a response to trade deficits – as well as an effort to curb the flow of the opioid fentanyl. His administration says chemicals used to make the drug come from China.

Beijing has previously said that America’s fentanyl crisis was its own issue.

The new US tariff of an additional 10% on Chinese imports came into effect on Tuesday.

In a statement announcing its response, China said the move was “not only unhelpful in solving its [America’s] own problems, but also undermines the normal economic and trade cooperation between China and the US”.

Other steps Beijing has taken in response to the Trump administration’s new tariffs include adding more US companies to its blacklist “unreliable entity” list.

This time PHV Corp, the company that owns fashion brands Calvin Klein and Tommy Hilfiger, and US biotechnology firm Illumina, have both been targeted.

In a statement, China’s commerce ministry accused the firms of “discriminatory measures against Chinese enterprises”.

Firms added to the list may face a number of sanctions including fines and having the work visas of their foreign employees revoked.

Beijing has also announced plans to restrict the export of 25 critical minerals, some of which are key components for electrical products.

These include tungsten, which is difficult to source and a crucial material for the aerospace industry, tellurium, widely used for solar panels, and molybdenum, which is used to strengthen steel alloys.

A Chinese watchdog has launched an investigation into Google for alleged violations of competition rules, known as antitrust.

Although Google’s search services have been blocked in China since 2010, it still has some business activities in China. It still provides apps and games to the Chinese market through partnership with local developers for example.

Both the US and China have in the past imposed tariffs on hundreds of billions of dollars’ worth of one another’s goods in the past as part of an ongoing trade war.

Meanwhile, Trump has suspended for 30 days the 25% tariffs on Mexico and Canada that he threatened.

After last-minute negotiations, the two US neighbours agreed to stricter border security and taking bigger steps to address fentanyl trafficking – a win for Trump’s strategy of leveraging the US economy to force concessions from other countries.

Together, China, Mexico and Canada accounted for more than 40% of imports into the US last year.

It remains unclear whether Trump will follow through on his threats to Canada and Mexico once the 30-day deadline is up.

That uncertainty stirs fears that could see businesses reducing their reliance on American markets, holding off on investing in building new factories or hiring workers until the trade stand-off becomes clearer.

After last-minute calls with Trump, Canadian Prime Minister Justin Trudeau agreed to reinforce his country’s border with the US to clamp down on migration and the flow of the deadly drug fentanyl.

Earlier, Trump made a deal with Mexican President Claudia Sheinbaum. She agreed to reinforce the northern border with troops. In return the US would limit the flow of guns into Mexico.

But a US tariff of 10% on Chinese imports has come into effect, after a deadline of 00:01 EST (05:00 GMT) on Tuesday passed.

Shortly after, Beijing announced it was imposing retaliatory tariffs on a raft of American products, including 15% on coal and liquefied natural gas and 10% on crude oil and agricultural machinery.

Trump earlier said he planned to speak on the phone to his Chinese counterpart soon. He described the 10% import taxes as the “opening salvo” and said they could become “very, very substantial” if no agreement is made.

Monday’s breakthrough with Canada and Mexico came as they prepared retaliatory tariffs on American goods.

After two phone calls on Monday, Trump and Trudeau posted on social media that they had reached a temporary agreement on securing the border that would avoid tariffs for at least 30 days.

Both leaders portrayed the plan as a win.

“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 wrote on his social media site Truth SocialTrudeau said Canada was implementing a $1.3bn (£1bn) border plan that included nearly 10,000 frontline workers and more resources to halt the flow of fentanyl, a synthetic drug 50 times stronger than heroin, which Trump has cited as a major concern.

The prime minister also said Canada would appoint a “fentanyl czar” and launch a joint strike force with the US to combat crime, fentanyl and money laundering.

Much of the border security plan had already been announced by Canada in December.

It includes enhanced co-ordination with US law enforcement, increased information sharing, limiting traffic at the border, and the deployment of drones and Black Hawk helicopters for surveillance.

The news came just hours after Trump paused a separate tariff on Mexican goods in exchange for that country sending 10,000 National Guard troops to its border with the US.

President Sheinbaum broke the news on X, writing she had had a “good conversation with great respect for our relationship and sovereignty” with her US counterpart.

Trump described his phone conversation with the Mexican leader as “very friendly”.

In 2019, Mexico’s government agreed to send 15,000 soldiers to its northern frontier to avoid tariffs from the first Trump administration.

Trump has framed tariffs as a tool for growing the US economy, protecting jobs and raising tax revenue.

“Tariffs for us, nobody can compete with us because we’re the pot of gold,” he said on Monday afternoon.

“But if we don’t keep winning and keep doing well, we won’t be the pot of gold.”

Economists, however, have warned that tit-for-tat tariffs could raise prices for a wide range of products, including cars, lumber, steel, food and alcohol.

Items had already been removed from some shelves, and stock markets lurched downwards on Monday before recovering slightly with the announcement that tariffs had been suspended.

Andrew Furey, premier of Newfoundland and Labrador, acknowledged that the 30 days had brought some relief, but warned Canadians that a trade war still loomed.

He told the BBC he looked forward to using “the calm Canadian diplomatic approach to try to resolve any future tariffs”, but cautioned against further “chaotic” actions from the US president.

“We’re left as Canadians feeling a bit confused by this attack from our closest friend, our largest trading partner, our ally, family,” Furey said.

The premier of Ontario – Canada’s most populous province, which makes up about 38% of the country’s GDP – welcomed the pause and said he would suspend plans for retaliatory measures.

Premier Doug Ford wrote on X: “Make no mistake, Canada and Ontario continue to stare down the threat of tariffs.

“Whether it’s tomorrow, in a month or a year from now… President Trump will continue to use the threat of tariffs to get what he wants.”

On Sunday, Trump indicated the 27-nation European Union would be his next target for tariffs, without providing further details.

The American president suggested that Britain, which left the EU in 2020, might be spared much duties.

It urged Washington to start talks after repeated warnings that there would be no winners in a trade war.

It held its fire until midnight in Washington – and then just as the tariffs on China kicked in, Beijing announced retaliatory tariffs of 10-15%, starting 10 February, on various US imports, including coal, crude oil and large cars.

The Chinese government may have remained calm in the hope of doing a deal with Washington to avoid further tariffs – and to keep the relationship between the world’s two largest economies from spiralling out of control.

After all, US President Donald Trump agreed to reprieves with Canada and Mexico just hours before the tariffs on them took effect. Trump and China’s President Xi Jinping are expected to talk this week.

The US levy will sting – especially because it adds to a slew of tariffs Trump imposed in his first term on tens of billions of dollars of Chinese imports. And China’s population is already concerned about their sluggish economy.

Beijing and Washington have gone toe-to-toe on tariffs before. But a lot has changed since Trump 1.0.

For one, the Chinese economy is not as reliant on the US as it was back in 2020. Beijing has strengthened its trade agreements across Africa, South America and South East Asia. It is now the largest trading partner of more than 120 countries.

A deal could still be in the offing but the additional 10% may not offer the leverage that Trump wants, says Chong Ja Ian from Carnegie China.

Xi’s ‘win-win’ as America retreats

President Xi Jinping may also see a bigger opportunity here.

Trump is sowing division in his own backyard, threatening to hit even the European Union (EU) with tariffs – all in his first month in office. His actions may have other US allies wondering what is in store for them.

In contrast, China will want to appear a calm, stable and perhaps more attractive global trade partner.

“Trump’s America-first policy will bring challenges and threats to almost all countries in the world,” says Yun Sun, director of the China programme at the Stimson Centre.

“From the perspective of US-China strategic competition, a deterioration of US leadership and credibility will benefit China. it is unlikely to turn well for China on the bilateral level, but Beijing surely will try to make lemonade…”

As a leader of the world’s second-largest economy, Xi has made no secret of his ambition for China to lead analternative world order.

Since the end of the Covid pandemic, he has travelled extensively, and he has supported major international institutions such as the World Bank and agreements such as the Paris climate accords.

Chinese state media have portrayed this as embracing countries across the world and deepening diplomatic ties.

Before that, when Trump halted US funding to the WHO in 2020, China pledged additional funds. Expectations are high that Beijing may step in to fill America’s shoes again, following Washington’s exit from the WHO.

The same applies for the aid freeze that is causing such chaos in countries and organisations that have long depended on US funding – China may wish to fill the gap, despite an economic downturn.

On his first day back in office, Trump froze all foreign assistance provided by the US, which is by far the world’s biggest aid donor. Hundreds of foreign aid programmes delivered by USAID ground to a halt. Some have since restarted, but aid contractors describe ongoing chaos as the future of the agency hangs in the balance.

Trump’s “America First” doctrine could further weaken Washington’s position as a global leader, says John Delury, a historian of modern China and Professor at Yonsei University in Seoul.

“The combination of tariffs on major trade partners and freezing of foreign assistance sends a message to the Global South and OECD alike that the US is not interested in international partnership, collaboration,” he tells the BBC.

“President Xi’s consistent message of ‘win-win’ globalisation takes on a whole new meaning as America retreats from the world.”

In its bid for global governance, Beijing has been looking for a chance to upend the the American-led world order of the last 50 years – and the uncertainty of Trump’s presidency may well be it.

New alliances

“Whether it really confers Beijing a key advantage – of that I’m a little less sure,” Mr Chong says.

“Many US allies and partners, especially in the Pacific, have a reason to work with Beijing, but they also have reasons to be wary. That’s why we’ve seen Japan, South Korea, the Philippines and Australia move closer together, in part because of the apprehensions they harbour towards China.”

There is “gathering momentum” for a possible trilateral relationship among Australia, Japan and South Korea, motivated by “the impact of a second Trump administration”, according to The Australian Institute of International Affairs.

All three are concerned about China’s assertiveness in the South China Sea, along with the Philippines. They are also worried about a possible war over the self-governed island of Taiwan – Beijing sees it as a breakaway province that will, eventually, be part of the country, and has not ruled out the use of force to achieve this.

Taiwan has long been one of the most contentious issues in US-China relations, with Beijing condemning any perceived support from Washington for Taipei.

But it may be difficult for Washington to hit back at signs of Chinese aggression when Trump repeatedly threatens to annex Canada or buy Greenland.

Most countries in the region have used a military alliance with Washington to balance their economic relationship with China.

But now, wary of Beijing and unsure of the US, they could create new Asian alliances, with neither of the world’s biggest powers.

Calm before the storm

Trump announced the US tariffs on the weekend, as Chinese families were celebrating the New Year and inviting the God of Fortune into their homes.

Bright red lanterns currently swing over empty Beijing streets as most workers have left for their hometowns during the biggest holiday of the year.

At first, China’s only response had been that it would take legal action and use the World Trade Organisation to air its grievances.

But this poses little threat to Washington. The WTO’s dispute settlement system has been effectively shut down since 2019 when Donald Trump – in his first term then – blocked the appointment of judges to handle appeals.

Then China announced retaliatory tariffs. As the holiday draws to a close and party officials return to Beijing and to work, they have decisions to make.

Officials had been encouraged in recent weeks by signs that the Trump administration may want to keep the relationship stable especially after the two leaders had what Trump called “a great phone call” last month.

But that is going to get harder, as both Republicans and Democrats increasingly view China as America’s biggest foreign policy and economic threat.

“Mr Trump’s unpredictability, his impulsiveness and recklessness will inevitably lead to significant shocks in the bilateral relationship,” says Wu Xinbo, professor and director at the Centre for American Studies at Fudan University.

“Additionally, his team contains quite a few hawks, even extreme hawks on China. It is unavoidable that the bilateral relationship will face serious disruption over the next four years.”

China is certainly concerned about its relationship with the US and the harm a trade war could do to its slowing economy.

But it will also be looking for ways to use the current political pendulum to swing the international community its way and within its sphere of influence.

China said it would implement a 15% tariff on coal and liquefied natural gas products as well as a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the US from 10 February.

The date is important. It means there is still time for the world’s two largest economies to step back from the brink of a trade war.

The two leaders have scheduled a call later this week, according to the White House, and there are signs, despite today’s announcement, that China is in listening mode and is keeping the door open for talks.

Firstly, China’s counter measures are limited in scope compared to Donald Trump’s levy of 10% on all Chinese goods heading to the US.

America is the biggest exporter of liquid natural gas across the world, but China accounts for only around 2.3% of those exports and its major car imports are from Europe and Japan.

This calculated and selective targeting of goods may just be an opening shot by Beijing, a way of gaining some bargaining power and leverage ahead of any talks.

Officials in China may be encouraged by the cordial start to the US-China relationship since Trump took office.

The US president said he had a “very good” phone call with President Xi days before his inaugural ceremony, which was attended by the highest-level Chinese official ever to be dispatched to such an event. He has also suggested that he hopes to work with Xi on resolving Russia’s war in Ukraine.

President Xi might not want to pick a fight with Trump just yet as he is busy trying to shore up his own ailing economy.

This is also familiar territory for both leaders – although they might not be keen to relive the past. There was a honeymoon period in US-China relations during Trump’s last term, before the relationship soured.

To deal or not to deal

It will also be far more difficult for Trump to do a deal with China than with Mexico and Canada – and much will depend on what he wants from Beijing.

China is Washington’s chief economic rival and cutting the country off from major supply chains has been a goal of the Trump administration.

If Trump asks for too much, Xi might feel he can walk away and there will be limits on just how far he is willing to be pushed.

The US president is dealing with a far more confident China than he did back then. Beijing has expanded its global footprint, and it is now the lead trade partner for more than 120 countries.

Over the past two decades, it has also steadily tried to reduce the importance of trade to its economy and ramped up domestic production. Today, imports and exports account for around 37% of China’s GDP, compared with more than 60% in the early 2000s, according to the Council on Foreign Relations.

The 10% tariff will sting, but Beijing may feel it can absorb the blow – for now.

The fear will be that President Trump is serious about ramping up that percentage to the 60% he pledged during his campaign or that he will continue to use the threat of tariffs as a recurring diplomatic tool to hold over Xi’s head.

If that happens, Beijing will want to be ready and that means having a clear strategy in case this escalates.

Learning from the past

The last time the leaders signed a deal it did not end well.

The two countries issued tit-for-tat tariffs on hundreds of billions of dollars’ worth of goods from 2018.

It lasted more than two years until eventually China agreed to spend an extra $200bn (£161bn) a year on US goods in 2020.

Washington hoped the deal would bring down the huge trade deficit between China and the US, but the plan was derailed by the Covid pandemic and that deficit now sits at $361bn, according to Chinese customs data.

There are also key challenges for China as it is thinking several steps ahead in any negotiation.

Beijing still sells nearly four times more goods to the United States than it buys – and during Trump’s first term in office, it ran out of items to target.

Analysts believe that China is now looking at a wider range of measures than just tariffs to retaliate if the trade war ramps up.

The clock is ticking. This is not a full trade war, yet. Businesses around the world will be watching to see if the two leaders can reach some kind of settlement later this week.