On Wednesday, the United States and China were on the verge of a full-scale trade war, caught in a tense standoff as President Donald Trump initiated a new set of tariffs against numerous trade partners.
The global economy has been shaken since the implementation of sweeping 10% tariffs by the US over the weekend, leading to a significant market sell-off around the world and fueling fears of a recession.
Import rates for various economies to the United States increased from 12:01 AM (0401 GMT) on Wednesday, pushing tariffs on Chinese goods imposed since Trump’s return to the White House to an astonishing 104%. The newly introduced tariffs include rates of 20% on the European Union, 26% on India, and 49% on Cambodia.
These new tariffs had an immediate impact on some Asian markets, with Taiwan’s stock market plunging 5.8% in afternoon sessions and Japan’s Nikkei index falling 5%. Concurrently, the yen strengthened by 1% as investors sought safety amid the evolving tariff landscape. Hong Kong’s benchmark Hang Seng index decreased by 1.6%, while China’s market appeared to withstand the turmoil, aided by government interventions. Oil prices plummeted to their lowest levels in over four years.
These tariffs have been designed for specific countries using a methodology criticized by economists, which divides the goods trade deficit by twice the total value of imports.
“President Trump possesses a spine of steel and will not yield,” stated press secretary Karoline Leavitt on Tuesday. “America will stand strong under his leadership.”
On Tuesday, US stocks fell for the fourth consecutive trading day since Trump’s tariff announcement last week, with the S&P 500 closing below 5,000 for the first time in nearly a year.
In response to the situation, several governments announced measures for intervention, including Taiwan, which authorized emergency stabilization funds for the stock market. Seoul declared a $2 billion emergency support package for its automotive sector, which includes financial backing, tax reductions, and subsidies. Trump’s 25% tariffs on imported cars and light trucks are anticipated to significantly affect South Korea’s industry.
New Zealand’s central bank lowered interest rates citing the US tariffs, stating that “uncertainty regarding global trade policy has weakened expectations.”
The US president believes his strategy will revitalize America’s dwindling manufacturing sector by compelling companies to relocate to the US. However, many business analysts and economists doubt the speed of this transition, if it can happen at all, warning of rising inflation as tariffs increase prices.
Scott Bessent, the US treasury secretary, has declared that the new tariffs are set at “maximum” levels, expressing confidence that negotiations will lead to reductions.
“I believe you will see significant countries with considerable trade deficits [with the US] come forward quite rapidly,” he told CNBC on Tuesday. “If they bring solid proposals to the table, we could reach beneficial deals.”
When asked on Monday if the tariffs would lead to negotiations or be permanent, Trump replied, “Both can be true.” He noted that there can be enduring tariffs alongside negotiations.
On Tuesday, Trump claimed the United States was “bringing in nearly $2 billion a day” from tariffs. During an evening address to Republican lawmakers, he announced he would soon reveal “major” tariffs on pharmaceutical imports, suggesting these duties would encourage drug manufacturers to shift their operations to the US.
The administration has planned discussions with South Korea and Japan, two close allies and key trading partners, and Italian Prime Minister Giorgia Meloni is expected to visit next week.
“These are meticulously crafted deals,” Trump stated at a White House event. “We have been in talks with many, many nations, over 70, all desiring to engage. Our challenge is managing the volume of negotiations swiftly.”
Trump’s top trade representative, Jamieson Greer, reported to the Senate that Argentina, Vietnam, and Israel are among the countries that have offered to reduce their tariffs.
Initially, Trump proposed a 34% additional tariff on Chinese goods. Following China’s announcement of a reciprocal 34% tariff on US products, he projected another 50% duty, which when combined with earlier levies implemented in February and March, would escalate the cumulative tariff increase on Chinese goods during Trump’s second term to 104%.
Beijing denounced the US’s actions as blackmail, vowing to “resist until the end.” Trump contended that the initiative was now in China’s hands, suggesting that Beijing “desperately wants a deal, but doesn’t know how to initiate it.”
On China’s social media platform, Weibo, the tariffs were one of the top trending topics, with users mocking the US for its egg shortages, sharing images of barren supermarket shelves. “If you can’t even manage an egg, why engage in a trade war?” one user questioned.
Weibo users also deliberated over the potential rise in iPhone prices due to the tariffs, with many expressing interest in switching to phones manufactured by Chinese brands like Huawei or Xiaomi.
Prominent Chinese bloggers hinted that China might consider restricting imports of American poultry and eggs as a countermeasure in the trade conflict, which would severely affect US farmers.
On Tuesday, UK Chancellor Rachel Reeves aimed to alleviate market volatility concerns, informing parliament that she had spoken with Andrew Bailey, the governor of the Bank of England, who affirmed that “markets are functioning effectively and our banking system is robust.”
Reeves contended that a trade war “is in nobody’s interests” and confirmed the UK’s intent to negotiate a new agreement with the US. Trump has implemented a 10% tariff on UK exports, aligning with the minimum benchmark established over the weekend.
The European Union has attempted to de-escalate the situation, with the bloc’s chief Ursula von der Leyen cautioning against exacerbating the trade conflict during a call with Chinese Premier Li Qiang.
She emphasized the importance of stability for the global economy, along with “the necessity to avoid further escalation,” according to an EU statement.
French President Emmanuel Macron urged Trump to reconsider, stating that if the EU is compelled to respond, “so be it.”
With Agence France-Presse
