Tuesday briefing: China retaliates after last-minute reprieves on tariffs for Mexico and Canada

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– but the trade war's underway now, and as the news from Beijing shows, it's become a fair bit trickier to put the brakes on.

“A totally bizarre trade war”.

After the big falls on the market yesterday, there's a bit of a bounce today due to the news on Mexico and Canada getting off the hook. But it's possible Trump might have another change of heart, and reasonable people are wondering what the real benefit is of the small wins he's had so far on border restrictions. Our newsletter today looks at the retaliation and reprieves, and what might happen next. Here are the main stories.

Five big stories

1. over the potential green light for a massive new oilfield, after Treasury sources hinted Rachel Reeves would likely give it her tick of approval. The proposed Rosebank project was given the go-ahead in 2023 but was knocked back by a court just last week.

2. Lung cancer among non-smokers is now estimated to be the fifth leading cause of cancer deaths globally.

3. A 15-year-old boy has been arrested on suspicion of murder after an incident at All Saints' Catholic High School, South Yorkshire police said.

4. The changes mean pharmacies can no longer rely solely on the information provided in an online questionnaire when making decisions about ordering online prescriptions for medications like Wegovy or Mounjaro.

5. Khalife, 23, triggered a major pursuit by escaping from HMP Wandsworth in September 2023, using the bottom of an eating-out food truck for a piggyback ride.

Fair dinkum: An in-depth look at a conflict that most experts reckon won't have any winners

In November, proponents reckon that when tariffs are used prudently, they can lend an upper hand to locally sourced alternatives by makin' imports far too pricey.

But economists tend to see them as a bit of a blunt tool – which would definitely kick the target country when it's down, but also do a bit of damage to the host economy and risk startin' a trade war that can really ratchet up the consequences.

Here's a rundown of where things are at with Trump's threats, and how they might unfold.

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A counterattack spanning from ute chassis to search engine platforms

Trump threatened a 60% tariff on Chinese goods during the election campaign; the actual figure, 10%, is much lower, but when added to existing measures brings the average tariff on Chinese goods to between 20% and 30%. Trump claims that his intention is to force Beijing to do more to stop fentanyl, a deadly opioid, and its precursors from being smuggled into the US – but most experts reckon a far broader economic game plan is at play.

Many Chinese businesses had initially begun shifting their supply chains offshore to circumvent current trade impost.

Fair dinkum, China's response was straight to the point as well: 15% tariffs on coal and liquefied natural gas, and 10% on crude oil, farm equipment, big V8s and utes from the Yanks. It also slapped export restrictions on goodies like tungsten and tellurium, which are used in heaps of commercial applications back home. Its investigation into Google could be a real game-changer if it's just the beginning of a crackdown on US tech firms that operate in the Middle Kingdom.

The impact of all this is complicated and tricky to forecast. But it might mean that the two biggest economies in the world pull further back into their own regions of influence. The effects of a split of this sort will be felt far beyond the US and China alone.

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‘Fair dinkum, it's a relief, but the damage is gone for good’

With the US receiving 83% of Mexican goods exports, the effect of Trump's threatened tariffs would be extremely significant. However, the two parties agreed to a deal yesterday to "pause" the tariffs for a month.

Fails to rule out that policies supposed to combat these issues may also hinder foreign investment. In theory, the tariffs on Mexico are meant to put an end to what's being described as an "intolerable alliance" between the country's government and organised crime outfits, and to curb illegal immigration and the smuggling of fentanyl across the border.

Mexico’s president, Claudia Sheinbaum, dismissed the first claim as “slanderous”. However, she agreed to commit 10,000 troops to the border, while the US said it will work on stopping high-powered guns being smuggled across the other way.

“At least in the short term it's a bit of a relief, but the damage is done ... if companies operate on a long-term plan, their thinking on Mexico's role in the US supply chain will never be the same."

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" On Tuesday, it was revealed that a last-minute deregulation for a state's borders had been filed just a couple of days ago.

The cessation of tariffs against Canada came even later than the reprieve for Mexico, and followed two telephone calls between Trump and Canadian Prime Minister Justin Trudeau yesterday.

Trump's claim that his plan was meant to stop fentanyl imports is hardly convincing at the US's northern border: only 19 kilograms of the drug were seized by US border agents last year, compared to 9,600 kilograms from Mexico. It's possible that the uncertainty over what Trump's real goal is will serve him well in both cases, as it lets him claim success without having a clear benchmark to measure it against. Trudeau said yesterday that Canada would build on previous measures by sending additional technology and personnel to the border, appointing a fentanyl task force leader, and listing cartels as terrorist organisations.

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Tens of thousands of hats with the slogan "Canada's Not For Sale" have been sold, and those who are seen as sympathetic to Trump are being labelled "Vichy Canadians".

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Plans are under consideration for a two-pronged approach to encouraging participation and punishing non-participation.

Trump's threat that new tariffs on the EU will "definitely happen" is based on his claim that "they don't take our cars, they don't take our farm products, they take almost nothing and we take everything from them". He also said: "They've really taken advantage, you know, we have a $300bn deficit". He later corrected the figure to $350bn.

for next year's projection shows a US surplus in services of 104 billion euros ($107 billion), giving us a pretty different overall picture than what Trump claimed.

From last month, Jennifer Rankin reported that the European Commission, which handles trade policy across the EU, has been preparing a "carrot and stick" approach – with retaliatory tariffs on US goods on one side and offers to buy more US goods on the other side. On the “carrot” side, Brussels has stated it's willing to negotiate buying more US liquefied natural gas to replace Russian imports.

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A choice between which countries to do business with?

The Aussie bloke's got it nagging in his head, mate, that Trump told the BBC he "might" slap tariffs on the UK, but could work it out, while reckonin' Keir Starmer's been a real nice bloke. If that sounds like good news for Starmer at the minute, fair dinkum, it's a pretty fair way off from gettin' any guarantees the UK's chooks will be exempt from Yanks' tariffs down the rat race.

Even if Trump does change his mind, the UK is somewhat less vulnerable to tariffs than some other countries: of $AUE183 billion exports last year, 68% was in services, data from the Office for National Statistics says. Tariffs are generally only applied to goods.

For the Resolution Foundation, Emily Fry and Sophie Hale write: “For the UK on its own, the least-bad scenario might be to live with tariffs, being careful and picked-off about any retaliation, so that Britain’s businesses and consumers can keep getting the benefits from £58 billion worth of imports from the US every year.”

But the UK might also have to decide which side to take in the event of a worsening trade war – and this report suggests that because the UK's largest trading partner is the EU, "single-handedly being open could be difficult to maintain if the EU became worried about the UK being a backdoor for goods from the US and beyond".

What else we've looked at

• He's on the money, especially when he points out that pop music is now having a significant influence on popular culture, just as it was before social media took over, where it was thought to have been replaced.

• She says the president's a "buffalo painted by Holbein" but warns that "to ridicule and look down on style that's a rebel against the established order only plays into Trump's hands".

• Cyril Nri's Lance got knocked out with a gold dollar club in Cucumber, and he reckons "it was hard staying emotionally in the right space for four hours up close".

• This place is a ripper of a party.

• "Fair dinkum, I was tryin' to rip apart, blow apart the idea of beauty," Fargeat says.

Sport

A 74th minute own goal from Aaron Wan-Bissaka gifted the hosts the win.

Bayern Munich are looking to loan out striker Mathys Tel with a £50m buyback option in the summer after re-entering the market for one of the standout players of the winter transfer window. On deadline day, West Ham signed Brighton's Evan Ferguson on loan and Everton made a move for attacking midfielder Carlos Alcaraz from Flamengo, with an option to make the deal permanent in the summer.

That's one of the happiest moments of her life was turned sour when Luis Rubiales, the then Spanish Football Federation president, gave her an impromptu kiss on the lips after Spain won the World Cup in August 2023. Rubiales is accused of sexual assault and coercion, claiming he implied that Hermoso make a public statement saying the kiss was consensual.

The front pages

“Markets bounce back after Sheinbaum's chat with Trump brings tariff pause.”

focuses on new photographs of Catherine, the Princess of Wales, with the headline: “Good on ya, Mummy!”

Today in Focus

‘A city of ghosts’: two Gaza residents return home.

A chance to catch a glimpse of what's left of their homes, suburbs and communities.

Cartoon of the day | Reebs

The Upside

Here's a bit of good news to remind you that the world's not all bushfire and drought.

Photographer Martin Divíšek went to the 27th annual Sedivackuv Long sled dog race, held in the Orlicke mountain range near the Czech border with Poland.

He captures over 700 dogs and their "musher" handlers during the tough four-day trek. His photos are a heartwarming reminder of the strong friendship between blokes and dogs – and they're dead set adorable.

Bored at work?

And finally, the Smartrak's puzzles are here to keep you occupied throughout the day. Until tomorrow, mate.

• Quick crossword

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