China and the United States are locked in an escalating war of words backed by threats of new tariffs before key deadlines that are threatening to plunge an already unsettled global economy into an even deeper crisis.
US President Donald Trump’s “Liberation Day” tariff impositions last Thursday saw China slapped with higher tariffs on its US exports and a minimum of 10 percent levied on all other countries exporting to the US. The announcements threw the global stock market into chaos as investor confidence fell across the world.
Beijing has since retaliated with its own tariff hikes, while other countries are scrambling to negotiate trade deals with Washington.
But on Monday, Trump raised the temperature with China further, threatening still more tariffs unless Beijing withdraws its latest levies on US goods. China responded, saying it would not back down.
The back-and-forth tariff measures continue to destabilise global stock markets this week amid fears that the trade war could significantly worsen.
Here’s what to know about the spat between the world’s two largest economies.
What’s the latest?
Last Friday, China announced a 34 percent additional tariff on US imports, two days after Trump had announced an identical tariff rise on Chinese imports.
But in a post on his Truth Social network on Monday, Trump threatened to ramp up tariffs on China still further if Beijing did not pull back its latest levies by Tuesday.
The new threat? A 50 percent tariff, on top of the effective US tariff of 54 percent on Chinese imports.
Trump said China announced its tariffs “despite my warning that any country that Retaliates against the U.S. by issuing additional Tariffs… will be immediately met with new and substantially higher Tariffs”.
“If China does not withdraw its 34 percent increase above their already long-term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” he posted.
Trump also said his administration would cancel negotiation talks he claimed Chinese officials had requested regarding the tariffs. For other countries wanting to negotiate, talks would proceed, he said.
“Negotiations with other countries, which have also requested meetings, will begin taking place immediately. Thank you for your attention to this matter!” he posted.
How has China reacted?
China’s Ministry of Commerce, in a statement on Tuesday, took a combative stance, saying Washington’s actions were “completely groundless” and a form of “bullying”.
China defended the reciprocal tariffs it imposed and said they were aimed at safeguarding its “sovereignty, security and development interests”, as well as maintaining a balanced international trade market.
Beijing added it was ready to “fight to the end” if Trump went ahead with even more tariffs.
“The US threat to escalate tariffs on China is a mistake on top of a mistake and once again exposes the blackmailing nature of the US. China will never accept this. If the US insists on its own way, China will fight to the end,” it added.
What is the backdrop to this?
Last Wednesday, Trump’s tariff announcements hit almost all US trade partners and sent markets reeling. Some analysts called it the “worse than the worst-case scenario”.
The president announced a baseline 10 percent tariff for all imports to the US. He further announced much higher duties on dozens of other countries that the US claimed unfairly taxed its goods, calling them the “worst offenders”.
Lesotho, the small Southern African nation, was slapped with the highest tariff on the list, at 50 percent.
China, the US’s third-largest trading partner accounting for more than $430bn of US imports annually, also saw one of the higher levies at 34 percent. However, China was already burdened with levies earlier placed on its exports to the US.
Since taking office in January, Trump has levied 10 percent tariffs on Chinese goods – twice. The first was on February 1, and then, on March 4, the rates were doubled. The new announcement of a 34 percent levy last week, therefore, brought the combined tariffs on China to 54 percent.
If Trump makes good on his threat on Tuesday, Chinese imports will be subject to a 104 percent tariff.
China, too, had responded to the earlier imposed tariffs with countermeasures of its own. On March 10, it announced between 10 and 15 percent tariffs on US imports. The 34 percent additional tariffs it announced on Friday would bring the total tariffs on US imports to between 44 and 49 percent.
China has also limited the exports of critical rare earth elements used to manufacture gadgets to the US and banned exports of dual-use items that could be used for military or civilian purposes to some US defence companies.
What could happen to both economies?
Both countries appear prepared to escalate but are already facing the effects of the trade war, experts say.
Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place. This is…
— Donald J. Trump (@realDonaldTrump) April 7, 2025
The tariffs have come as a major shock to Chinese companies, for whom the US is a key export market. China’s exports to the US are mostly electrical goods as well as vehicles. On the other hand, the US exports mainly agricultural produce, machinery, aircraft, and pharmaceuticals to China.
Analysts expect China’s markets to shrink due to the US tariffs, despite Beijing’s bravado. According to Morgan Stanley, the Chinese economy could weaken by 1.5 to 2 percentage points this year.
Besides matching tariff hikes, experts say China could test further retaliatory measures on the US, including halting the imports of US agricultural produce and restricting its exports of critical metals and minerals to the US even further.
US stocks, meanwhile, saw a shaky close on Monday. The S&P 500 fell by 0.2 percent, while the Dow Jones Industrial Average fell 349 points, or 0.9 percent. The Nasdaq composite rose 0.1 percent.
Stocks climbed briefly early in the day after social media users claimed that Kevin Hassett, a top White House economic adviser, said the president was considering a pause on the tariffs. However, a White House post on X called it “fake news”.
President Trump has also ruled out a pause. In a Monday post on X, Trump said the US was bringing in “Billions of Dollars a week from the abusing countries on Tariffs that are already in place”.
“This is despite the fact that the biggest abuser of them all, China, whose markets are crashing, just raised its Tariffs by 34%, on top of its long term ridiculously high Tariffs (Plus!), not acknowledging my warning for abusing countries not to retaliate,” he added.
