China raises tariffs on US goods to 125% in escalating trade war
Market reactions and US response
Beijing's announcement triggered market volatility—stocks fluctuated, gold prices soared, and U.S. government bonds came under pressure. Despite market concerns, President Donald Trump downplayed the situation, calling the tariff strategy "exciting for America and the world" on social media.
However, investor confidence faltered, with the U.S. dollar falling to a three-year low against the euro, signaling unease about the country's economic outlook under Trump's trade policies.
China blames US, signals limits
China's State Council Tariff Commission confirmed the new tariffs would take effect Saturday, nearly matching the 145% rate the U.S. imposed on Chinese imports. A Commerce Ministry spokesperson said the U.S. bore full responsibility, describing Trump's policy as a "numbers game" that "will become a joke."
China also acknowledged that further tariff increases were impractical, admitting U.S. goods are now virtually unsellable in the Chinese market.
Economic concerns mount
Economists warn the escalating trade war could severely damage both economies and trigger a global recession. Swissquote Bank analyst Ipek Ozkardeskaya remarked that the tariffs were "so high they don't make sense anymore," suggesting China is prioritizing long-term relief over short-term economic gains.
Trump's tariff policy and ongoing talks
Trump began this wave of tariffs on April 2 with a 10% baseline on all imports. After briefly easing tariffs on US allies like the EU and Japan, he maintained a 34% tariff on China, prompting Beijing's retaliation.
Despite the sharp escalation, Trump expressed hope for a deal with Chinese President Xi Jinping, calling him a long-time friend and saying a "very good" agreement could still be reached.
China and EU seek cooperation
In talks with Spain's Prime Minister Pedro Sanchez, President Xi Jinping suggested that China and the EU should collaborate to resist unilateral trade tactics. A China-EU summit marking 50 years of diplomatic ties is scheduled for July.
EU's potential response
While Europe has yet to retaliate, EU trade chief Maros Sefcovic is planning talks in Washington. EU Commission President Ursula von der Leyen confirmed the bloc has a 'wide range of countermeasures' ready if negotiations falter, including a possible digital services tax targeting U.S. tech firms.
Meanwhile, ECB President Christine Lagarde reassured markets that the bank stands ready to act if needed to protect eurozone financial stability.
Global market reactions
Wall Street saw a mixed day—stocks opened lower but later recovered. European and Asian markets dropped after China's announcement, with Tokyo down 3%, and other Asian indices following suit.
Safe-haven asset gold surged above $3,200, while U.S. Treasuries weakened, possibly due to speculation that China may be selling off its U.S. debt holdings in retaliation.
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