China ratchets up war of words telling Trump 'no one will win a trade war' after president elect vowed to impose huge tariffs on their imports

Beijing has ramped up its war of words with president-elect Donald Trump after he vowed to impose huge tariffs on Chinese imports, warning him that 'no one will win a trade war.'

The Republican, who is due to take office in January, pledged to implement major tariffs on imports from the US' three biggest trading partners, China, Mexico and Canada, until they clamped down on drugs and people smuggling into America. 

After saying he would impose a 25% tariff on goods from Mexico and Canada, he added that he was planning on forcing 'an additional 10% tariff, above any additional tariffs' on imports from China, after previously saying he would end China's most-favored-nation trading status and slap tariffs on Chinese imports in excess of 60% - much higher than those imposed during his first term. 

In a post to Truth Social, Trump said: 'I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States – But to no avail. 

'Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before. 

'Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.'

Few were happy about the announcement, with the Wall Street Journal reporting that Mexican peso and Canadian dollar weakened in the wake of the proposed tariffs, least of all China. 

A Chinese embassy spokesperson in Washington said China believes that China-U.S. economic and trade cooperation is mutually beneficial in nature. 'No one will win a trade war or a tariff war,' Liu Pengyu said.

The embassy also cited steps it said China had taken since a 2023 U.S.-China meeting after which Beijing agreed it would stem the export of items related to the production of the opioid fentanyl, a leading cause of drug overdoses in the United States.

'All these prove that the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality,' the spokesperson said.

Mao Ning, a Chinese foreign ministry spokesperson, told a regular press conference in Beijing on Tuesday that China had noted Trump's comments and would respond in due course.

The U.S. accounted for more than 83% of exports from Mexico in 2023 and 75% of Canadian exports.

The tariffs may also spell trouble for overseas companies like the many Asian auto and electronics manufacturers that use Mexico as a low-cost production gateway for the U.S. market.

Trump's threatened new tariffs would appear to violate the terms of the U.S.-Mexico-Canada Agreement (USMCA) on trade. The deal which Trump signed into law took effect in 2020 and continued the largely duty-free trade between the three countries.

Canada and the United States at one point imposed sanctions on each others' products during the rancorous talks that eventually led to USMCA. Trump will have the opportunity to renegotiate the agreement in 2026, when a 'sunset' provision will force either a withdrawal or talks on changes to the pact. 

But Trump could be counting on the threat of tariffs to prompt an early renegotiation of USMCA, said William Reinsch, a former president of the National Foreign Trade Council.

'This strikes me more as a threat than anything else,' Reinsch said. 'I guess the idea is if you keep hitting them in the face, eventually they'll surrender.'

Mexico's lower house leader Ricardo Monreal, a member of the ruling Morena party, urged 'the use of bilateral, institutional mechanisms to combat human, drug and arms trafficking.'

'Escalating trade retaliation would only hurt the people's pocketbooks and is far from solving underlying problems,' he said in a post on social media platform X.

Trump's announcement sparked a dollar rally. It rose 1% against the Canadian dollar and 1.6% against the Mexican peso, while share markets in Asia fell, as did European equity futures. S&P 500 futures eased 0.1%.

Canada's deputy prime minister, Chrystia Freeland, released a statement on Monday evening saying that the country places the highest priority on border security and the integrity of its shared border with the US. Trump and the Canadian prime minister, Justin Trudeau, spoke on Monday night about trade and border security, Reuters reported, citing a Canadian source directly familiar with the situation.

Arturo Sarukhan, a former Mexican diplomat, said the decision would violate the revised free trade pact between the United States, Canada and Mexico, known as the USMCA, and said the new tariffs would 'put North American relations in a downward spiral'.

Mexico's finance ministry said: 'Mexico is the United States' top trade partner, and the USMCA provides a framework of certainty for national and international investors.'