The trade dispute initiated by US President Donald Trump intensified on Wednesday as both China and the European Union implemented retaliatory tariffs on American goods, injecting significant volatility into global markets.
President Trump’s latest round of tariffs targeting numerous trading partners came into effect earlier in the day. Following the counterattacks from Beijing and Brussels, Trump took to his Truth Social platform, stating, “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” In a development marking a significant strain on China-US relations in recent decades, Trump escalated the duties initially planned for Chinese imports, ultimately raising them to 104 percent after China announced its intention to retaliate.
Beijing had initially scheduled to impose a 34 percent tariff on imports of US products starting at 1601 GMT on Wednesday. However, the finance ministry announced a revised increase to 84 percent in response to Trump’s tariff hike.
“The tariff escalation against China by the United States simply piles mistakes on top of mistakes (and) severely infringes on China’s legitimate rights and interests,” the Chinese finance ministry asserted.
Washington’s actions “severely damage the multilateral rules-based trade system,” the ministry added.
China also announced the blacklisting of six American artificial intelligence firms, including Shield AI and Sierra Nevada Corp.
The European Union (EU) unveiled countermeasures targeting over 20 billion euros’ worth of US products, including soybeans, motorcycles, and beauty products, set to take effect on April 15. These levies are in response to US duties imposed on global steel and aluminum exports the previous month.
“These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome,” the European Commission stated after approval from EU member states.
“The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy,” the commission further added. The EU is still formulating its response to the 20 percent levy that took effect on Wednesday.
Warnings against retaliation
US officials had previously cautioned nations against retaliating to the imposed tariffs. “I think what a lot of people are missing here is that the levels that were put out last Wednesday are a ceiling, if you don’t retaliate,” commented US Treasury Secretary Scott Bessent at a US banking summit on Wednesday.
Bessent warned that aligning with Beijing “would be cutting your own throat,” accusing China of excess production and “dumping” inexpensive goods on other economies.
President Trump believes his trade policy will revitalize America’s manufacturing sector by compelling companies to relocate to the United States. “This is a GREAT time to move your COMPANY into the United States of America, like Apple, and so many others, in record numbers, are doing,” Trump posted on Truth Social, urging, “DON’T WAIT, DO IT NOW!”
However, numerous business experts and economists have expressed skepticism regarding the speed and likelihood of this occurring, while also cautioning about the potential for reigniting inflation.
Mixed market ractions
The escalating trade conflict has resulted in trillions of dollars being wiped off market valuations since the previous week, as investors express concerns that the trade war will trigger an economic recession. Following a brief respite on Tuesday, stock markets experienced renewed volatility on Wednesday.
Wall Street’s main indexes showed gains in early trading, while European stock markets experienced declines of around three percent in afternoon trading. Tokyo’s Nikkei index closed nearly four percent lower.
The US dollar weakened against major currencies, and oil prices fell below $60 a barrel, reaching their lowest level in four years. Government bond yields, representing the interest rates countries pay to borrow, increased in the United States, Japan, and Britain, among other nations.
The Bank of England cautioned about risks to “UK financial stability” arising from heightened geopolitical tensions, including the repercussions of the US tariffs. Italy is reportedly preparing to halve its 2025 growth forecast to 0.6 percent from 1.2 percent, according to a government source, while Spain is also anticipated to downgrade its economic outlook.
President Trump has indicated that his administration is working on “tailored deals” with trading partners, with the White House stating it would prioritize allies such as Japan and South Korea, which have been hit with tariffs of 24 percent and 25 percent, respectively. His top trade official, Jamieson Greer, informed the Senate that Argentina, Vietnam, and Israel were among the countries that had offered to reduce their tariffs.
During a dinner with fellow Republicans on Tuesday night, Trump stated that countries were “dying” to reach an agreement. “I’m telling you, these countries are calling us up kissing my ass,” he asserted.
Trump also announced that the United States would unveil significant tariffs on pharmaceuticals “very shortly,” leading to a sell-off in the shares of pharmaceutical companies.
