China has escalated its tariffs on US imports to 125%, retaliating against US President Donald Trump’s choice to raise duties on Chinese products, thereby intensifying the stakes in a trade conflict that threatens to disrupt global supply chains.
This retaliation by China has exacerbated the economic turmoil triggered by Mr. Trump’s tariffs, leading to plunging markets and foreign leaders grappling with how to address the most significant disruption to the global trade landscape in decades.
This morning, US markets opened lower. The Dow Jones Industrial Average dropped 100.2 points at the opening, while the S&P 500 fell 12.5 points at the sound of the bell.
“The risk of recession is significantly higher now than it was just a few weeks ago,” stated Adam Hetts, global head of multi-asset at Janus Henderson.
Uncertainty lingered, leading to some of the most erratic trading seen since the early days of the Covid-19 pandemic.
“We are performing exceptionally well with our TARIFF POLICY. It’s very exciting for America and the world!!! Progress is swift,” Mr. Trump shared on social media on Friday.
However, analysts warn that the escalating tariff exchanges between the US and China could render goods trade between the two largest economies nearly impossible, a trade that amounted to over $650 billion in 2024.
Global stock markets declined, the dollar weakened, and a sell-off in US government bonds intensified, rekindling concerns about fragility in the world’s largest bond market. Gold, traditionally a safe haven during crises, reached an all-time high.
Trade war with China
This week, while announcing a 90-day tariff pause on several countries, Mr. Trump concurrently increased tariffs on Chinese imports to an effective 145%.
In response, China introduced its own new tariffs on Friday, with the finance ministry denouncing Mr. Trump’s new tariffs as “completely unilateral bullying and coercion.”
Donald Trump has now enacted new tariffs on Chinese goods of 145% since his inauguration.
Beijing indicated that this would be the final instance of matching US tariffs if Mr. Trump escalates duties further. Nevertheless, it left the door open for alternative forms of retaliation.
“If the US genuinely seeks dialogue, it should cease its unpredictable and harmful actions,” Liu Pengyu, spokesperson for the Chinese Embassy in the United States, commented on social media. “For the benefit of the Chinese people and the global community, and for fairness and justice in the global order, China will not yield to the maximum pressure from the US.”
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UBS analysts noted that China’s assertion that it would not retaliate further with tariff increases indicates “an acknowledgment that trade between the two nations has essentially been entirely severed.”
US Trade Representative Jamieson Greer remarked that he was not surprised by China’s recent countermeasures, although they were “truly unfortunate.”
Mr. Trump told reporters at the White House yesterday that he believed the United States could successfully negotiate a deal with China and expressed respect for Chinese President Xi Jinping.
Mr. Trump declared that Chinese President Xi Jinping has “been a friend of mine for a long time.”
During his first public remarks regarding Mr. Trump’s tariffs, Mr. Xi told Spanish Prime Minister Pedro Sanchez in Beijing that China and the European Union should “jointly oppose unilateral acts of bullying,” clearly addressing Mr. Trump’s tariff strategies.
China has established two agricultural trade agreements with Spain pertaining to pork and cherries as it attempts to improve its strained ties with the EU, which remains the last significant open market for its products.
Trade negotiations
The Trump administration has downplayed the market volatility, asserting that deals with other nations will restore certainty.
US trade official Greer mentioned that he intends to discuss tariffs with Israeli and Taiwanese counterparts after an extensive conversation with Vietnamese representatives.
“I have a busy agenda,” Mr. Greer shared in an interview with Fox News.
“Documents are being exchanged as countries propose ways to establish more reciprocal trade with us,” he noted. “We are examining those proposals, engaging with those countries, and providing feedback.”
European Commission President Ursula von der Leyen cautioned that counter-tariffs could be reinstated.
Meanwhile, India and the US have finalized terms of reference for discussions regarding the initial segment of a bilateral trade agreement, according to an Indian trade official. Additionally, Japanese Prime Minister Shigeru Ishiba has formed a trade task force with plans to visit Washington next week.
Vietnam is reportedly ready to clamp down on Chinese goods being shipped to the US via its territory in an effort to avoid tariffs, as exclusive reports from Reuters shared.
Fragile pause
Yet, this flurry of activity has done little to alleviate business leaders’ concerns regarding the repercussions of Mr. Trump’s trade war and its disorganized implementation: rising costs, declining orders, and disrupted supply chains.
For European companies, a stronger euro inherently reduces their competitiveness in the global market.
This morning, the euro continued to climb, reaching its highest point in over three years against the dollar.
Read more: Tariff reprieve seen as merely a pause in a turbulent journey.
Mr. Trump’s decision to implement a 90-day suspension on tariffs provided only a “fragile pause,” asserted French President Emmanuel Macron, partly because “this 90-day pause signals 90 days of uncertainty for all our businesses, across both sides of the Atlantic and beyond.”
EU finance ministers are brainstorming how to leverage this pause to secure a trade agreement with Washington, while the bloc’s trade commissioner, Maros Sefcovic, is scheduled for discussions with US officials in Washington on Monday.
Looking ahead, the implications of tariff chaos on policymakers’ viewpoints regarding rate cuts will be the focus of the upcoming European Central Bank meeting next week.
Corporate earnings reports are also poised to gather momentum in the upcoming days, with market analysts anticipating profit warnings.
