Beijing increased its tariffs on US imports to 125% on Friday, hitting back against US President Donald Trump’s decision to hike duties on Chinese goods and raising the stakes in a trade war that threatens to upend global supply chains.
China’s retaliation intensified the economic turmoil unleashed by Trump’s tariffs, which has seen markets tumbling and foreign leaders puzzling how to respond to the biggest disruption to the world trade order in decades.
US markets opened lower on Friday. The Dow Jones Industrial Average fell 100.2 points at the open, while the S&P 500 fell 12.5 points at the bell.
“Recession risk is much, much higher now than it was a couple weeks ago,” said Adam Hetts, global head of multi-asset at Janus Henderson.
The US administration was sticking to its guns on Friday, touting its discussions with a number of countries on new trade deals which it says will justify its dramatic upheaval in policy.
“We are doing really well on our TARIFF POLICY. Very exciting for America, and the World!!! It is moving along quickly,” Trump posted on social media on Friday.
However, the tit-for-tat tariff increases by the US and China stand to make goods trade between the world’s two largest economies impossible, analysts say. That commerce was worth more than $650 billion in 2024.
Global stocks fell, the dollar slid, and a sell-off in US government bonds picked up pace on Friday, reigniting fears of fragility in the world’s biggest bond market. Gold, a safe haven for investors in times of crisis, scaled a record high.
Trade war with China
While announcing a 90-day tariff pause on dozens of countries earlier this week, Trump ratcheted up tariffs on Chinese imports, raising them effectively to 145%.
China hit back with its own new tariffs on Friday, with the finance ministry saying Trump’s new tariffs were “completely unilateral bullying and coercion”.
Beijing indicated that this would be the last time it matched the US, should Trump take his duties any higher. But it left the door open for Beijing to turn to other types of retaliation.
“If the US truly wants to have talks, it should stop its capricious and destructive behavior,” Liu Pengyu, spokesperson for the Chinese Embassy in the United States, wrote on social media on Friday. “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 US.”
UBS analysts in a note called China’s declaration that it would not retaliate any further with tariff increases “an acknowledgement that trade between the two countries has essentially been completely severed”.
US Trade Representative Jamieson Greer said he was not surprised by China’s latest countermeasures, but they were “certainly unfortunate”.
Trump had told reporters at the White House on Thursday that he thought the United States could make a deal with China and said he respected Chinese President Xi Jinping.
Xi, in his first public remarks on Trump’s tariffs, told Spanish Prime Minister Pedro Sanchez during a meeting in Beijing on Friday that China and the European Union should “jointly oppose unilateral acts of bullying,” in a clear swipe at Trump’s tariff policies.
China has signed two agricultural trade protocols with Spain covering pork and cherries as it looks to mend its strained relationship with the EU, the last open major market for its products.
Trade talks
The Trump administration has shrugged off the market turmoil, saying striking deals with other countries would bring certainty.
US trade official Greer said that he will speak to his Israeli and Taiwanese counterparts on Friday about tariffs after holding a long discussion with the Vietnamese earlier.
“I have a full dance card,” Greer said in an interview with Fox News.
“There are pieces of paper going back and forth as countries come in and make suggestions about what they can do to have more reciprocal trade with us,” he said. “We’re looking at those, we’re reviewing those, we’re communicating with them and giving them ideas.”
Meanwhile, India and the US have finalised terms of reference for talks over the first segment of a bilateral trade deal, an Indian trade official said.
And Japanese Prime Minister Shigeru Ishiba has set up a trade task force that hopes to visit Washington next week.
Vietnam is prepared to crack down on Chinese goods being shipped to the United States via its territory in the hope of avoiding tariffs, Reuters exclusively reported.
Fragile pause
But all this has done little to soothe business leaders’ worries about the fallout from Trump’s trade war and its chaotic implementation: soaring costs, falling orders and snarled supply chains.
For European businesses in particular, a stronger euro automatically makes them less competitive in the global market.
The euro extended its rise on Friday, reaching its highest in over three years versus the dollar.
Trump’s decision for a 90-day suspension on tariffs gave room for only a “fragile pause,” French President Emmanuel Macron said on X, partly because “this 90-day pause means 90 days of uncertainty for all our businesses, on both sides of the Atlantic and beyond”.
EU finance ministers brainstormed on Friday how to use the pause to get a trade deal with Washington, while the bloc’s trade commissioner, Maros Sefcovic, will hold talks with US officials on Monday in Washington.
Looking ahead, how tariff chaos will change policymakers’ thinking on rate cuts will be the focus when the European Central Bank meets next week.
Corporate earnings reports also pick up steam in the coming days, with markets expecting profit warnings.
Reuters
