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China retaliated against the United States by raising its import tariffs to 125 percent on Friday. Trump administration's decision to hike duties on Chinese goods to 145% and raising the stakes in a trade war that threatens to up-end global supply chains.
Meanwhile, Trump's tariffs continued to cause chaos on Friday, sending markets plummeting and foreign leaders unsure of how to respond to the biggest disruption to the global trade system in decades. A brief reprieve for battered stocks seen after Trump decided to pause duties for dozens of countries for 90 days quickly dissipated, as attention returned to his escalating trade war with China that has fuelled global recession fears.
Stocks worldwide fell. On Friday, concerns about fragility in the world's largest bond market were rekindled as the dollar fell and a sell-off in U.S. government bonds picked up speed. Gold hit a record high, providing investors with a safe haven during times of crisis. "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.
U.S. Treasury Secretary Scott Bessent tried to assuage sceptics by telling a cabinet meeting on Thursday that more than 75 countries wanted to start trade negotiations. Trump himself expressed a desire for a deal with China, the second-largest economy in the world. However, the uncertainty extended some of the most volatile trading since the COVID-19 pandemic's infancy. Asian indices mostly followed Wall Street lower on Friday.
Europe's STOXX 600 index was down more than 1 percent on the day as a result of China's most recent tariff hike, which sent stocks lower. This week will be one of the most volatile on record for the index. On Thursday, Bessent said that reaching agreements with other nations would bring certainty, and he shrugged off the new turmoil in the market. The U.S. and Vietnam have agreed to begin formal trade talks, the White House said. Reuters exclusively reported that the manufacturing hub in Southeast Asia is ready to take action against Chinese goods that are shipped to the United States via its territory in the hope of avoiding tariffs. In the meantime, Shigeru Ishiba, the prime minister of Japan, has established a trade task force that plans to visit Washington next week. China deal?
As Trump suddenly paused his 'reciprocal' tariffs on other countries hours after they came into effect earlier this week, he ratcheted up duties on Chinese imports as punishment for Beijing's initial move to retaliate.
He has now imposed new tariffs on Chinese goods of 145% since taking office, a White House official said.
On Friday, China responded with additional tariffs. "The U.S. imposition of abnormally high tariffs on China seriously violates international and economic trade rules, basic economic laws and common sense and is completely unilateral bullying and coercion," China's finance ministry said in a statement.
Trump 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.
He stated, "In a true sense, he's a friend of mine for a long time, and I think that we'll end up working out something that's very good for both countries." 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," China's state news agency Xinhua reported.
The Chinese leader told his guest, "There are no winners in a trade war," and added that the world's second-largest economy and the 27-member European trade bloc could support "the global rules-based order" by working together. European authorities estimate the impact of the U.S.
The region's economy would be hit with tariffs equal to 0.5 to 1 percent of GDP. Given the EU economy as a whole is forecast to grow 0.9% this year, according to the European Central Bank, the U.S. tariffs could tip the EU into recession.
The euro has surged 1.7% to $1.13855, a level last seen in February 2022.
French President Emmanuel Macron stated that Trump's decision to suspend tariffs for 90 days left only room for a "fragile pause." This was in part due to the fact that steel, aluminum, and automobile tariffs, in addition to general duties of 10%, remained. Fragile, also, "because this 90-day pause means 90 days of uncertainty for all our businesses, on both sides of the Atlantic and beyond," Macron said on X.