Live Updates: China Raises Tariffs on U.S. to 125% as Tit-For-Tat Trade War Escalates
“China raised tariffs on American goods to 125% in response to the White House’s increased levy on Chinese goods to 125%. This escalation in the trade war has raised concerns about a global recession and led to volatility in stock markets. The European Union is taking steps to protect its interests and position itself at the center of the evolving global trading system.
Beijing’s latest retaliation came after the White House raised its levy on Chinese goods to 125 percent, on top of an existing 20 percent tax. Stocks in Europe were volatile, following losses on Wall Street a day earlier.
Pinned
China responded to President Trump’s tariffs on Friday, raising its own tariffs on American goods to 125 percent, as the world’s two biggest economies extended a fast-moving tit-for-tat that has seen the cost of trade soar and fueled concerns over a global recession.
The announcement came after Trump administration officials clarified that China was now facing a minimum tariff rate of 145 percent on all exports to the United States. China mocked Mr. Trump’s tariff policies as “a joke” in an official statement and said its new tariffs, which raise the tax on American imports from 84 percent, would take effect on Saturday.
In a sign that the federal government’s technology is struggling to keep up with President Trump’s tariffs, Customs and Border Protection acknowledged on Friday that importers had not been able to submit a tariff on certain goods. The glitch appeared to be preventing importers from applying a lower tariff rate on goods that were in transit to the United States before some of Mr. Trump’s tariffs took effect. Customs and Border Protection said it was releasing the goods and allowing importers to submit their customs duties later.
China issued new regulations on Friday that will subject semiconductors made by U.S. firms to higher tariffs. The measures will put pressure on companies like Intel, Global Foundries and others who have U.S. chip factories, potentially encouraging chip companies to shift manufacturing out of the United States to maintain access to the Chinese market, where the bulk of global electronics are made.
The Tit-for-Tat Tariffs Between the U.S. and China
President Trump raised tariffs on Chinese
goods multiple times this year, reaching 145%.
25% on cars
and parts
25% on steel
and aluminum
China refrained at first from retaliating with force, but as Mr. Trump kept going, China responded to his “reciprocal” tariffs with equivalent levies.
10% on U.S. food and agricultural products
10% on natural gas, coal and farm machinery
BlackRock’s chief executive, Laurence D. Fink, said on CNBC that in the wake of the push for tariffs, the United States had become “the global destabilizer.” He called this a big shift from the role the U.S. had played as “the global stabilizer” since the end of World War II.
President Trump claimed that his administration was “doing really well on our TARIFF POLICY,” as markets once again whipsawed over the persistent uncertainty surrounding trade. The president did not cite any specific examples of talks underway with foreign leaders or trade deals nearing completion, but he said in a post on Truth Social: “Very exciting for America, and the World!!! It is moving along quickly.”
Laurence D. Fink, chief executive of the giant asset manager BlackRock, reiterated his call on a recession. The United States is “very close, if not in a recession now,” Fink said on CNBC. “The market is also underestimating how high inflation can get.”
According to the latest survey by the University of Michigan, consumer sentiment plummeted again in April as expectations for inflation surged. In the year-ahead, respondents expect inflation to rise to 6.7 percent, the highest outlook since 1981 and a sharp acceleration from 5 percent in March. Expectations for longer-run inflation climbed to 4.4 percent in April.
One criticism of the University of Michigan survey is that it reflects political biases. Democrats have tended to be overly pessimistic about the economic outlook since Trump returned to Washington. But recently a broader range of respondents have started to shift their views. The preliminary April report said the slide in sentiment was “pervasive and unanimous across age, income, education, geographic region, and political affiliation.” There was a rise in inflation expectations for the year across all political affiliations, whereas the rise in longer-run expectations was largely driven by independents.
Tesla’s sales in the United States fell almost 9 percent in the first three months of the year even as the overall market for electric vehicles grew, according to data compiled by a research firm.
Car buyers are moving away from Teslas and toward models like General Motors’ Chevrolet Equinox electric vehicle, which starts at around $35,000 and can travel more than 300 miles on a charge, Cox Automotive, the research firm, said in a report.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, warned on CNBC that the Treasury bond sell-off coupled with a weakening U.S. dollar may suggest that investors hold a dimmer view of the relative safety of U.S. assets in times of stress. “Normally, when you see big tariff increases, I would have expected the dollar to go up,” he said. “The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting.”
“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit,” Kashkari said. “So now, one of the ways that expresses itself is in lower yields across asset classes in America. If the trade deficit is going to go down, it could be that investors are saying, ‘OK, America no longer is the most attractive place in the world to invest,’ and then you would expect to see bond yields go up.”
U.S. stock markets just opened slightly lower. The S&P 500 index is down about 0.3 percent as this extremely volatile week approaches an end.
At least twice this morning, Peter Navarro, a senior White House trade adviser, has described the president’s trade strategy as “90 deals in 90 days” — a reference to the 90-day tariff pause announced this week. “Americans should trust in Trump, the markets should trust in Trump, and not get these weak knees,” he said on Fox Business.
“Time is not our friend,” said Robin Vince, chief executive of the large bank BNY. He told me in an interview that if the Trump administration does not quickly began to reach trade deals, confidence in stocks and the economy will fall further, long before the 90-day reprieve from tariffs ends.
News Analysis
President Trump has big ambitions for the global trading system and is using tariffs to try to rip it down and rebuild it. But the European Union is taking action after action to make sure the continent is at the center of whatever world comes next.
As one of the globe’s biggest and most open economies, the E.U. has a lot on the line as the rules of trade undergo a once-in-a-generation upheaval. Its companies benefit from sending their cars, pharmaceuticals and machinery overseas. Its consumers benefit from American search engines and foreign fuels.
As turbulence hits stocks, bonds and the dollar, one asset is soaring: Gold. On Friday it hit another record, trading above $3,200 per troy ounce. Gold is considered a haven asset, and geopolitical risk often leads to strong demand for it. I’ve written about why the gold price is rising this year.
Amid acute worry about the recent moves in Treasury bonds, JPMorgan Chase’s chief executive, Jamie Dimon, said in a media briefing that his bank was concerned and looking at the bond market “every minute.”
Jamieson Greer, the top trade official for President Trump, described China’s new retaliation against American tariffs as “not terribly surprising but certainly unfortunate.” Speaking on Fox News, he also downplayed the risks that the tit-for-tat could result in substantial price increases for consumers, given how much the U.S. imports from China: “While there may be an adjustment, I think we’re going to be on a good path, and I don’t think we’re going to see that level of increase in household expenses.”
President Trump paused some of his steepest global tariffs this week. But a 25 percent levy on imported cars remains in place, and that’s causing anxiety in Solihull, England, where 9,000 people work for a large Jaguar Land Rover car factory.
JLR, which sells about a fifth of its cars in the United States, responded to the tariffs by pausing shipments to the U.S. in April.
Prime Minister Pedro Sanchez of Spain met with China’s leader in Beijing today. President Xi Jinping told Sanchez he favored closer ties between China and the E.U. to “jointly safeguard the trend of economic globalization and the international trade environment, and jointly oppose unilateral acts of bullying,” according to the official Xinhua News Agency.
The visit resulted in a deal for China to open its market further to imports of Spanish pork. China last month put a levy on U.S. pork imports in retaliation for a first wave of Trump tariffs. But Sanchez warned against the risk of a U.S.-China trade war: “The world needs both China and the United States to talk.”
Wall Street’s earnings season starts today, and some of the biggest financial firms will be talking about how the tariffs and trade war will affect their bottom lines. The morning got off to an early start with BlackRock, whose chief executive, Larry Fink, in a statement compared the scene to “the financial crisis, COVID, and surging inflation in 2022.”
Fink and other finance heavy-hitters, including Jamie Dimon, chief executive of JPMorgan Chase, are expected to field many more questions on the topic later this morning.
President Emmanuel Macron of France said the partial suspension of U.S. tariffs for 90 days was an opening for negotiation. But the pause was “fragile,” he said, because 25 percent tariffs on steel, aluminum and autos, as well as 10 percent tariffs on all other products, are still in place. “Europe must continue to work on all necessary countermeasures and mobilize all available levers to protect itself, and also to prevent flows from third countries from disrupting our market,” Macron said in a post on X.
Macron added that French entrepreneurs and industrialists he met with this week told him that they were worried, and that their businesses were already being hit “right to the heart” by Trump’s tariffs.
The European Union trade commissioner will meet with his American counterparts in Washington on Monday, according to Olof Gill, a spokesman for the European Commission. The bloc wants to find “win-win outcomes, mutually beneficial deals,” Gill said.
A notable move in markets this week has been the fall in the U.S. dollar. The I.C.E. dollar index is down more than 1 percent today to its lowest level in about three years. “The dollar has also seen a historic weakening,” strategists at Deutsche Bank said, adding that markets are reassessing “how much of the historical premium for U.S. assets stemming from American exceptionalism is still justified under the radical vision and volatile policy of the new U.S. administration.”
The British economy grew 0.5 percent in February, a surprisingly strong showing that beat economists’ expectations, data published this morning showed. Much of the growth was driven by a jump in manufacturing output, particularly for electronics, pharmaceuticals and cars. Analysts have said this could be a sign of companies front-running exports to the U.S. to avoid tariffs.
News Analysis
For the two men at the forefront of a trade war that has begun to rupture ties between the world’s biggest economies, the question has become who will blink first.
On one side is President Trump, who unleashed a disruptive plan to transform the modern global trading system with tariffs — only to back down hours after it took effect, pausing the import duties for every country but China.
Tesla has stopped accepting new orders in China for two car models that it imports from a factory in the United States, after the Chinese government imposed steep tariffs on American imports.
On Friday, Tesla’s website in China removed the “order” button from the Model S sedan and Model X sport utility vehicle. Customers still have the option of purchasing one of those models, produced at its Fremont, Calif., factory, if the company has existing inventory.
All week we’ve been following the ups and downs in stock markets, and the volatility has been huge. One measure of it, the VIX index, known as Wall Street’s “fear gauge,” has risen to levels last seen during the early days of the coronavirus pandemic in March 2020.
The spokesperson for China’s commerce ministry issued a second statement, saying it would file another complaint with the World Trade Organization, this time about Trump’s decision to further raise tariffs on China to 145 percent. The U.S. action “seriously violates W.T.O. rules and seriously undermines the rules-based multilateral trading system and international economic and trade order,” the statement said.
When Congress voted to normalize trade relations with China at the beginning of this century, U.S. manufacturers braced for a stream of cheap goods to begin flowing into U.S. ports.
Instead, they got a flood. Imports from China nearly tripled from 1999 to 2005, and American factories, with their higher wages and stricter safety standards, couldn’t compete. The “China shock,” as it has come to be known, wiped out millions of jobs in the years that followed, leaving lasting scars on communities from Michigan to Mississippi.
China’s commerce ministry denounced President Trump’s repeated tariff increases. “The U.S.’s repeated imposition of exorbitant tariffs on China has already become a numbers game, with no practical economic significance,” the ministry’s spokesperson said in a statement. “It will only further expose the U.S.’s use of tariffs as instruments and weapons for bullying and coercion, ultimately becoming a laughingstock.”
Fact Check
President Trump has taken a whipsaw approach to tariffs, widening and shifting course in determining which countries and goods will be subject to them.
But across Mr. Trump’s political career, his case for tariffs has remained consistent, relying on a number of false and misleading claims to describe a global trade system that is “unfair” to the United States.
Strategies
If the on-again, off-again tariff announcements by President Trump have struck you as unusual, that’s for good reason. Nothing like this has ever happened before.
That’s the estimation of Douglas Irwin, a Dartmouth economic historian whose 2017 book, “Clashing Over Commerce: A History of US Trade Policy,” is the leading work on the subject. I called him for perspective. He told me that what we were experiencing was way outside the historical norm. One man alone has risked the first global trade war since the 1930s by raising tariffs to levels unseen for more than a century. The president’s actions, he said, represent a “big break with history.”
Markets shuddered on Friday as the trade war between the United States and China continued to escalate.
On Wall Street, at the end of an extremely volatile week, the S&P 500 index opened with a small drop and then climbed about half a percent higher. The Stoxx Europe 600 index slipped about 0.2 percent. Earlier on Friday, the pan-European index had dropped more steeply after China raised its tariffs on U.S. imports to 125 percent.
China on Friday said it was raising its tariffs on American goods to 125 percent, retaliating for the third time in the escalating trade war between the two superpowers.
The brinkmanship between President Trump and Xi Jinping, China’s top leader, threatens to rip apart trade ties between the world’s two largest economies after years of simmering tensions.“
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