The United States and China have entered the most severe phase of their tariff war, with both countries imposing unprecedented duties on each other’s goods. On 9 April 2025, President Donald Trump raised tariffs on Chinese imports to 125%. China responded with tariffs of 84% on American goods. Trump said the measures were in response to China’s “lack of respect” for international trade.
The escalation follows weeks of increasing economic friction.
In March, Trump imposed a 20% tariff on all Chinese imports. Beijing replied with a similar increase. The US then added another 34%, prompting China to match the rate. Trump raised the tariff to 104% before China’s latest 50% hike was even enforced. When Beijing followed through, the US lifted duties again, reaching the current 125%.
China's Commerce Ministry called the US actions “economic bullying” and pledged to “fight till the end.” Beijing is weighing additional countermeasures, including restrictions on US cultural exports and trade diversification across Asia. Economists forecast slower GDP growth in China and recession risks for the US.
The effects on markets have been immediate. The US stock market lost $1.5 trillion in value on 8 April. A rally followed Trump’s temporary tariff pause on non-Chinese imports, which brought a single-day $5 trillion recovery. The relief was short-lived. Analysts say the global economy is now at risk of entering “unchartered territory.”
The conflict started shortly after Trump’s second inauguration on 20 January 2025. He signed an executive order to impose a 25% tariff on imports from Canada, Mexico, and China, effective 1 February. Canada responded with equivalent tariffs. The US delayed enforcement against Canada and Mexico by 30 days to allow discussions on border issues.
Donald Trump approaches international trade like a bull in a porcelain shop, wielding tariffs without regard for economic fragility, legal frameworks, or global norms—despite holding only a basic undergraduate degree and showing little understanding of the rules that govern modern commerce. Donald Trump holds a Bachelor of Science degree in economics from the Wharton School of the University of Pennsylvania from 1968. Analysts noticed that Trumps calculations of tariffs on US good by other countries was full of mistakes and inaccuracies and had been copied from Ai language models like Chatgpt. He had included VAT as tariffs in most cases. VAT is paid locally by consumers on all goods, and has nothing to do with tariffs or imports.
On 4 February, a 10% tariff on Chinese goods took effect. China imposed tariffs on US coal and agricultural equipment. On 10 February, Trump increased steel and aluminium tariffs to 25%, removing previous exemptions. Three days later, he introduced “reciprocal tariffs” that aligned US import duties with those of its trading partners.
By 4 March, the US raised tariffs on Canada, Mexico, and China to 25%. Retaliatory measures followed. Canada and China both imposed additional duties. Canada added tariffs on US dairy and machinery. China expanded its tariffs on agricultural products and industrial goods.
The next day, Washington postponed tariffs on Mexican and Canadian cars until 2 April, citing the USMCA agreement. The delay aimed to allow both countries to prove compliance.
Trump declared 2 April as “Liberation Day.” He announced a minimum 10% tariff on all imports from 5 April. On 9 April, the US enforced higher “reciprocal tariffs” on many countries but kept them suspended for 90 days, except those against China.
Canada imposed new tariffs of 25% on US vehicles not compliant with USMCA. The European Union approved retaliatory tariffs on American goods, including grains, clothing, and poultry. EU officials said the US duties were “unjustified.” Most EU tariffs are set at 25%, targeting roughly €22 billion in annual US exports.
Hungary was the only EU member to oppose the countermeasures. France, Ireland, and Italy lobbied to exclude bourbon from the list to avoid a 200% US tariff on European alcohol. The EU warned the countermeasures could be suspended if Washington returned to talks.
The European Commission is preparing a second tariff package in response to additional US tariffs on cars and a 20% blanket tariff on all EU exports. US officials claim EU value-added taxes cost American firms over $200 billion annually.
The European Union approved a set of retaliatory tariffs in response to the US measures, targeting a broad range of American goods such as grains, clothing, poultry, and metals, with most levies set at 25%. The bloc stated the US actions were “unjustified and damaging” but left the door open for negotiations. Finland supported the EU response but experienced direct economic fallout, with pension funds reporting losses of up to €10 billion within one week due to global market instability. Finnish pension officials said they maintained long-term strategies despite the short-term impact.
Critics within the bloc argued that the EU’s response lacked sufficient force to deter Donald Trump, describing the strategy of proportionate retaliation as ineffective against unilateral escalation. Some member states voiced concern that attempting to negotiate or mirror US actions without stronger deterrents may embolden further aggression from Washington.
Trump stated his intent to keep restrictions on China until a deal is reached. He claimed China was “ripping off” the US and added that the new tariffs would deliver billions in revenue to the Treasury.
China has called the moves “blackmail.” The Commerce Ministry warned it might weaponise currency reserves if escalation continues. Market analysts at Deutsche Bank said the global system is entering a phase of “de-dollarisation.” US Treasuries, equities, and the dollar are all experiencing simultaneous selloffs.
George Saravelos, head of FX research at Deutsche Bank, said in a client note, “We are entering unchartered territory in the global financial system.” He described the situation as a collapse in confidence, rather than a traditional liquidity crisis.
Multiple countries have requested exemptions from US tariffs. Trump announced a 90-day grace period for most nations, maintaining a 10% baseline tariff. He said the decision was influenced by a market downturn and called for investors to “be cool.” Major indices rebounded, but losses from the initial escalation remain.
As of early April, over 70 nations have formally requested talks with the US Trade Representative. Trump has said he is willing to negotiate “tailored deals” but warned countries not to retaliate.
Russia and India have remained mostly silent on the trade war, though Indian officials expressed concern over disruption to global supply chains. Japan has sought exemptions while continuing bilateral talks with Washington.
Mexico has pledged to comply with USMCA provisions to avoid further tariffs. Canada has expressed disappointment but confirmed it will not escalate beyond current retaliatory measures.
South Korea, Australia, and Brazil are also in talks to minimise the effects of reciprocal tariffs. Trade officials from all three countries said they aim to maintain economic ties with the US without triggering further restrictions.
As of 10 April, tariffs remain at 125% for Chinese imports and 10% for others. The US has delayed further increases pending individual trade negotiations. The long-term impact on global trade flows and economic growth is under review by institutions including the IMF and WTO.
The Trump administration insists the tariff strategy will correct trade imbalances. China’s government continues to seek alliances with Asian and African economies to offset losses. Global institutions warn of systemic instability if tensions continue through the second quarter of 2025.
Bottom line is that Donald Trump is a bully with a poor understanding of politics, the economy, and even geography. He considers the whole world either subservient or adversarial to the United States. He “wants” Greenland and the Panama Canal, and wants every country to pay ransom or protection money to the United States, or else he threatens to use military force even against US allies. EU’s and Finland’s naive and subservient approach to Trump’s USA is harming the people and national economies. The only way to counter a bully is with strong countermeasures and a slap in the face.
HT
