China again vowed to “fight to the end” Wednesday as it fired the latest salvo in a global trade war sparked by U.S. President Donald Trump, with the European Union also announcing new trade barriers on American goods, escalating a global trade war that has hammered markets and raised the likelihood of a recession.
China announced a tariff hike on U.S. imports to 84% from 34%, shortly after Trump’s punitive 104% tariffs on Chinese imports kicked in on Wednesday, as a standoff between the world’s two largest economies showed no signs of resolution.
The EU said it would impose 25% tariffs on a range of U.S. imports in a first round of countermeasures. The 27-member bloc faces U.S. tariffs of 20% on most products and higher duties on autos and steel. Countermeasures in Canada, a close U.S. ally and major trading partner, also took effect on Wednesday.
Targeted U.S. duties on dozens of other countries, from Japan to Madagascar, also took effect, the latest in a thicket of tariffs that are unwinding a global trading order that has been in place for decades. Tariffs in the world’s largest consumer market now average above 20%, according to various estimates, up from 2.5% before Trump took office.
JPMorgan Chase CEO Jamie Dimon, a prominent voice on economic matters, said Trump’s tariffs would probably lead to a recession and defaults by borrowers.
Global markets took a pummeling, with the damage spreading beyond stock markets that have seen trillions of dollars in equity evaporate over the past week.
Oil prices plunged to four-year lows, while investors dumped U.S. Treasury bonds and the dollar, which are typically seen as safe-haven assets. The damage rolled into corporate funding markets, raising the cost of borrowing for even lower-risk companies.
Japan and Canada said they would cooperate to stabilize the global financial system – a task usually taken on by the United States during times of crisis.
Trump has shrugged off the market rout and offered investors mixed signals about whether the tariffs will remain in the long term, describing them as “permanent” but also boasting that they are pressuring other leaders to ask for negotiations.
“BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” he wrote on social media.
Trump has said the tariffs will help rebuild an industrial base that has withered over decades of trade liberalization, though he says he is open to negotiating down those barriers with trading partners on a country-by-country basis. Administration officials say those talks could address foreign and military aid as well as trade barriers.
Trump has already spoken with leaders of Japan and South Korea, and a delegation from Vietnam is due to meet with U.S. officials on Wednesday.
Administration officials say the tariffs may not be lifted anytime soon, and more could be in store. Trump on Tuesday reiterated plans for a “major” tariff on pharmaceutical imports, sending global drugmaker stocks plunging.
No talks for now
U.S. officials say they will not prioritize talks with China.
Earlier in the day, China called its trade surplus with the United States an inevitability and warned it had the “determination and means” to continue the fight if Trump kept hitting Chinese goods.
Along with the counter-tariffs, China also said it was launching an additional suit against the U.S. at the World Trade Organization (WTO) and placed further restrictions on American companies’ trade with Chinese companies.
Trump nearly doubled duties on Chinese imports, which had been set at 54% last week, in response to previous counter-tariffs from Beijing and said negotiations with them were terminated.
“If the U.S. insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the Ministry of Commerce wrote in a statement introducing its white paper on trade with the U.S.
China’s move is a losing proposition for Beijing, U.S. Treasury Secretary Scott Bessent said.
“I think it’s unfortunate that the Chinese actually don’t want to come and negotiate, because they are the worst offenders in the international trading system,” Bessent told Fox Business Network.
Beijing imposed restrictions on 18 U.S. companies, mostly in defense-related industries, adding to the 60 or so American firms already punished over Trump’s tariffs.
It told the World Trade Organization that the United States’ tariffs threatened to further destabilize global trade.
“The situation has dangerously escalated… As one of the affected members, China expresses grave concern and firm opposition to this reckless move,” it said in a statement to the WTO, according to Reuters.
China’s currency has faced heavy downward pressure. But sources told Reuters the central bank has asked major state-owned banks to reduce U.S. dollar purchases and would not allow sharp yuan declines.
Chinese makers of plastic Christmas trees and other holiday ornaments, who account for 87% of the U.S. market, say they have not yet received orders from U.S. importers.
So far, China has not appeared interested in bargaining.
“If the U.S. truly wants to resolve issues through dialogue and negotiation, it should adopt an attitude of equality, respect and mutual benefit,” said Ministry of Foreign Affairs spokesperson Lin Jian Wednesday.
Pain on the home front?
U.S. stock indexes inched higher on Wednesday as investors bought cheaper tech stocks. Since Trump unveiled his tariffs on April 2, the S&P 500 has suffered its deepest loss since the benchmark’s creation in the 1950s.
Economists say Trump’s tariffs could increase costs for the average U.S. household by several thousands of dollars annually, which could become a political liability for a president who campaigned on lowering the cost of living. Three out of four Americans expect prices to increase due to Trump’s tariffs, according to a Reuters/Ipsos poll.
Some companies have said they will raise prices immediately, but others could take time to materialize as the tariffs do not apply to goods currently in transit. Retail giant Walmart, the biggest U.S. importer of containerized goods, stuck to its full-year sales forecast and vowed to keep prices low.
Opposition Democrats, locked out of power in Washington, have struggled to form a coherent response. Some have blasted the tariffs as counterproductive, but others have said that Trump is simply going too far.
“Tariffs need to be used like a scalpel, not a hammer,” Michigan Governor Gretchen Whitmer, a swing-state governor seen as a possible presidential candidate, said at an event in Washington.
