In a significant escalation of the ongoing trade tensions, China has raised its tariffs on U.S. imports to an astounding 125%. This move comes in direct response to U.S. President Donald Trump’s recent decision to increase duties on Chinese goods, further heightening the stakes in a trade conflict that poses serious risks to global supply chains.
This retaliatory action from China exacerbates the economic instability triggered by President Trump’s tariffs, which have led to market declines and left international leaders grappling with how to navigate this disruption—one of the most significant in global trade in recent history.
As a result, U.S. markets opened lower today; the Dow Jones Industrial Average dropped by 100.2 points, while the S&P 500 experienced a decline of 12.5 points right at the opening bell. Adam Hetts, the global head of multi-asset at Janus Henderson, underscored this growing uncertainty, stating, “Recession risk is much, much higher now than it was a couple weeks ago.”
The trading environment has become increasingly volatile, reminiscent of the early days of the COVID-19 pandemic.
In a tweet shared on Friday, President Trump expressed optimism about the ongoing tariff policy, saying, “We are doing really well on our TARIFF POLICY. Very exciting for America, and the World!!! It is moving along quickly.” However, analysts caution that the escalating tit-for-tat tariff hikes from both the U.S. and China could lead to a near-total collapse of trade between the world’s two largest economies, a relationship that accounted for over $650 billion in trade in 2024.
As a consequence of these mounting tensions, global stocks have fallen, the dollar is experiencing volatility, and there is a noticeable sell-off in U.S. government bonds, reigniting fears concerning the stability of the largest bond market in the world. Meanwhile, gold has surged to record highs as investors flock to safe-haven assets amid the rising turmoil.
Trade War Dynamics
While President Trump recently paused tariffs on numerous countries for 90 days, he simultaneously increased tariffs on Chinese imports to a staggering 145%. In response, China’s finance ministry characterized Trump’s new tariffs as “completely unilateral bullying and coercion.”
Since taking office, Donald Trump has imposed new tariffs on Chinese goods amounting to 145%. Notably, Beijing has signaled that this could be its final response should the U.S. escalate tariffs further, yet it has not ruled out other forms of retaliation.
Liu Pengyu, spokesperson for the Chinese Embassy in the United States, noted, “If the U.S. truly wants to have talks, it should stop its capricious and destructive behavior. For the welfare of the Chinese and the people of the world, for the fairness and justice of the global order, China will never bow to maximum pressure of the U.S.”
Analysts at UBS indicated that China’s announcement about refraining from further tariff retaliation reflects an acknowledgment that trade between the two nations may effectively be severed.
U.S. Trade Representative Jamieson Greer noted he was not caught off guard by China’s latest countermeasures, referring to them as “certainly unfortunate.” President Trump previously expressed optimism about the potential for deals with China and stated his respect for Chinese President Xi Jinping, describing him as “a friend of mine for a long period of time.”
In a significant meeting with Spanish Prime Minister Pedro Sanchez, President Xi conveyed that China and the European Union should “jointly oppose unilateral acts of bullying,” signaling clear discontent with Trump’s tariff policies. Furthermore, China has recently signed two agricultural trade protocols with Spain targeting pork and cherries, as it seeks to mend its strained relationship with the European Union—its last major market open to its products.
Outlook on Trade Talks
Despite the market unrest, the Trump administration appears unfazed, suggesting that forging new deals with other countries could ultimately restore stability. Trade official Greer mentioned he is in discussions with his Israeli and Taiwanese counterparts about tariffs, following extensive talks with Vietnamese representatives.
“I have a full dance card,” Greer shared in an interview with Fox News. He added, “There are pieces of paper going back and forth as countries make suggestions about how they can engage in more reciprocal trade with us.”
European Commission President Ursula von der Leyen has issued warnings that counter-tariffs could be reinstated if tensions escalate further. On a parallel note, India and the U.S. have recently finalized the terms for discussions around the initial segment of a bilateral trade agreement. Additionally, Japanese Prime Minister Shigeru Ishiba has initiated a trade task force expected to visit Washington soon.
To mitigate tariffs, Vietnam is reportedly preparing to clamp down on Chinese goods being shipped through its territory to the United States, as per an exclusive report by Reuters.
Challenges Ahead
Yet, the precarious situation continues to raise alarm bells among business leaders regarding the fallout from Trump’s trade war, which has led to soaring costs, declining orders, and disrupted supply chains. Particularly for European companies, a stronger euro makes them less competitive in the global landscape.
Today, the euro has continued to rise, reaching its highest point in over three years against the dollar.
French President Emmanuel Macron characterized Trump’s 90-day tariff suspension as a “fragile pause,” emphasizing that it ultimately translates to “90 days of uncertainty for all our businesses, on both sides of the Atlantic and beyond.” EU finance ministers are exploring ways to leverage this pause to pursue a comprehensive trade agreement with Washington, while the EU’s trade commissioner Maros Sefcovic is set to engage with U.S. officials on Monday in Washington.
Looking ahead, the impact of this tariff chaos on policymaking and interest rate considerations will be closely monitored as the European Central Bank prepares to meet next week. Corporate earnings reports are also anticipated to gather momentum in the coming days, with market participants bracing for potential profit warnings.
Edited By Ali Musa
Axadle Times International – Monitoring.
