China announced additional tariffs of 34 per cent on US goods yesterday, striking back at US President Donald Trump and escalating a trade war that has fed fears of a recession and triggered a global stock market rout that showed no sign of slowing yesterday.
In the standoff between the world’s two biggest economies, Beijing also announced controls on exports of some rare earths, while Trump doubled down as well, vowing not to change course.
China added 11 US bodies to the ‘unreliable entity’ list, which allows Beijing to take punitive actions against foreign entities, including firms linked to arms sales to Taiwan, which China claims as part of its territory.
Other impacted nations like Canada have also readied retaliation in a mounting trade war after Trump raised US tariff barriers to the highest levels in more than a century, leading to a plunge in world financial markets.
Investment bank J P Morgan estimated a 60 per cent chance of the global economy entering recession by year-end, up from 40pc previously.
Wall Street was down sharply early yesterday afternoon in the wake of China’s response, a day after the Trump administration’s sweeping levies knocked off $2.4 trillion from US equities.
Shares of big tech stocks fell, helping to drive the Nasdaq toward a bear market. Companies with big exposure to China and Taiwan for manufacturing their products were hard-hit, with Apple down 4.7pc and Nvidia falling 7.6pc.
The Nasdaq dropped 4.6pc, bringing the index down over 20pc from its all-time closing high in December.
“This is significant and is unlikely to be over, hence the negative market reactions,” said Stephane Ekolo, Market & Equity Strategist, Tradition, London. “Investors are afraid of a ‘tit for tat’ trade war situation.”
Federal Reserve Chair Jerome Powell told a business journalists conference the tariffs were ‘larger than expected’ and elevated the risk of both higher inflation and slower growth.
The Fed can wait for more data to decide how monetary policy should respond, but it will focus on keeping inflation expectations anchored if Trump’s tariffs sparked more persistent price pressures, Powell said.
He did not directly address the US stocks selloff but acknowledged that uncertainty had paused business decisions.
“People are just, they just are kind of waiting for clarity,” Powell said. “I can’t tell you when that will pass, but you know, ultimately it will pass.”
Just before Powell spoke, Trump said in a Truth Social post that it was the ‘perfect time’ for the Fed to cut interest rates. “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Trump wrote.
Trump’s team has played down the market turbulence as an adjustment that would prove beneficial in the long run. The White House touted stronger-than-expected job data yesterday, after a Labour Department report showed the US economy added far more jobs in March than predicted.
But Trump’s sweeping import tariffs could test the labour market’s resilience in the months ahead amid sagging business confidence.
“To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!” Trump said in a social media post in all caps.
After Beijing’s retaliation, he posted: “China played it wrong, they panicked – the one thing they cannot afford to do!”
Trump said on Thursday he was open to talking to China and making a deal over TikTok by providing relief for US tariffs on Chinese goods in exchange for Beijing’s approval of the sale of the ByteDance-owned short video app.
Speaking to reporters on Air Force One, Trump said it was just an example and did not answer a question on whether plans were underway for him to talk to Chinese President Xi Jinping.
In contrast to the US labor report, Canada’s total employment fell and the unemployment rate ticked up in March, data showed on Friday. The country’s first monthly decrease in jobs since 2022 was prompted by uncertainty around tariffs, which forced companies to pause hiring and spurred some layoffs.
In Japan, one of the top US trading partners, Prime Minister Shigeru Ishiba said the tariffs had created a ‘national crisis’ as a plunge in banking shares yesterday set Tokyo’s stock market on course for its worst week in years.
US Secretary of State Marco Rubio disputed any economic crash, telling reporters that markets were reacting to the change and would adjust.
“We will not shoot from the hip – we want to give negotiations every chance to succeed to find a fair deal, to the benefit of both sides,” he said on social media.
Countries that are cautious about retaliating and thereby raising the stakes in the standoff with the US include Ireland, Italy, Poland and the Scandinavian nations.
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