Beijing raised tariffs on US imports to 125% yesterday, retaliating against US President Donald Trump's decision to increase duties on Chinese goods and further raising the stakes in a trade war that threatens to collapse global supply chains.
China's retaliation has amplified the economic instability caused by Trump's tariffs, sending stock markets plummeting and foreign leaders scrambling to find a response to the biggest disruption to the global trade order in decades.
A US survey of consumers showed that fears of inflation have reached their highest level since 1981.
"The risk of a recession is much, much higher now than it was a few weeks ago," Adam Hatts of Janus Henderson told Reuters.
The US administration is sticking to its policy, boasting of talks with several countries on new trade agreements that it claims will justify this drastic change in course. “We are doing very well with our tariff policy. Very exciting for America, and for the world!!! Everything is moving very fast,” Trump posted on social media yesterday.
However, mutual tariff increases between the US and China could, according to analysts, make trade in goods between the world's two largest economies virtually impossible. Reuters recalls that this exchange was worth more than $2024 billion in 650.
Global stock markets fell, the dollar weakened and the sell-off in US Treasury bonds continued yesterday, reigniting fears about the fragility of the world's largest bond market. Gold, a haven for investors in times of crisis, hit a record high.
Although he announced a 90-day pause in tariffs for dozens of countries earlier this week, Trump simultaneously increased pressure on China, effectively raising tariffs on Chinese imports to 145%.
China retaliated with its own new tariffs on Friday, and the Treasury Department said Trump's new measures were "completely unilateral violence and coercion."
Trump said on Thursday that he believed the United States could reach a deal with China, and expressed respect for Chinese President Xi Jinping.
Xi, in his first public comments on Trump's tariffs, said during a meeting with Spanish Prime Minister Pedro Sanchez in Beijing yesterday that China and the EU should "jointly oppose unilateral acts of violence."
China has signed two agricultural trade protocols with Spain, covering pork and cherry exports, seeking to mend strained relations with the EU - the last major open market for Chinese products.
China and the EU also established several economic working groups following a visit by European Trade Commissioner Maroš Šefčovič in late March, including groups on electric vehicle supply chain investment and agri-food market access issues.
European Commission President Ursula von der Leyen even changed her tone on Ukraine, calling on Beijing to “intensify its efforts to make a substantive contribution to the peace process,” instead of criticizing it for its economic support for Russia.
European diplomats, who have witnessed years of negotiations with Beijing without any progress on key issues such as trade imbalances, market access and reciprocity, do not have high hopes for a new beginning.
"It is up to the Chinese to show that they are serious about engaging with the EU. All the existing problems in the trade relationship are within their power to resolve them," a diplomat, who asked not to be named, told Reuters.
The euro continued to strengthen yesterday, reaching its highest level in more than three years against the dollar. For European companies, a stronger euro automatically makes them less competitive in the global market.
Trump's decision to suspend tariffs for 90 days provided only a "fragile pause," French President Emmanuel Macron said on X Network, in part because "that 90-day pause means 90 days of uncertainty for all our companies, on both sides of the Atlantic and beyond."
EU finance ministers pledged unity yesterday in trade deal negotiations with Washington, pointing out that US tariffs are more damaging to the US economy itself than to the European one.
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