China retaliates strongly against Trump’s ‘bullying’ tariffs amid rising global recession concerns

04 April 2025

China has responded forcefully to Donald Trump’s “bullying” tariffs, raising fears that the intensifying trade war might cause a global recession and triggering fresh chaos in the financial markets.

Beijing retaliated on Friday with 34% additional punitive tariffs on all U.S. imports, mirroring the U.S. decision and worsening a sell-off in global stock markets.

Since Trump’s Rose Garden announcement on Wednesday evening, about $5 trillion (£4 trillion) in value has been lost from global stock markets, analysts calculated.

In the UK, the FTSE 100 index of leading shares fell more than 7% from Monday, marking its worst trading week since late February 2020, when concern over the Covid-19 pandemic was overwhelming the markets.

The significant escalation in trade tensions between the two largest economies in the world has heightened concerns among investors regarding risks to global growth.

The chair of the U.S. central bank, the Federal Reserve, warned that the trade war would lead to “higher inflation and slower growth,” as Jerome Powell resisted Trump's calls to lower interest rates.

The International Monetary Fund (IMF) also warned that the escalating trade war could impact global economic growth. The tariffs “pose a significant risk to the global outlook amid sluggish growth,” according to IMF managing director Kristalina Georgieva.

China’s retaliation came after Trump imposed 34% tariffs on Chinese goods, which were already subject to a 20% levy, increasing the total levy to 54%. He also imposed substantial tariffs on neighboring Southeast Asian countries, including Vietnam, Cambodia, and Thailand, through which billions of dollars of Chinese exports are processed en route to the U.S.

Trump responded on his social media platform Truth Social on Friday, stating: “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!”

The UK chancellor, Rachel Reeves, said ministers would continue discussions with Washington, hoping that the 10% levy on UK exports could be removed. The UK offers a series of concessions, including reducing the £1 billion-a-year digital services tax for some of the largest tech firms.

“We are committed to doing everything possible to secure the best deal for British industry, working closely with them to protect prosperity and jobs here in the UK,” she stated.

Financial markets are anticipating an additional three interest rate cuts from the Bank of England by the year's end, weighing the risks of slower growth, as some analysts caution that a slowdown may compel Reeves to increase taxes in her autumn budget.

“Given her adherence to fiscal rules, the central expectation must be that if she remains committed, significant tax increases in the autumn are likely,” expressed Paul Johnson, the director of the Institute for Fiscal Studies.

On Wall Street, the tech-heavy Nasdaq index fell into bear market territory, having lost over 20% of its value since the sell-off began, declining by 5.8% on Friday alone. The S&P 500 dropped 9.1%, marking its worst five-day trading stretch since March 2020.

Oil prices also dropped significantly, as experts revised their forecasts for global growth, with Brent crude decreasing by 7% to about $65 a barrel.

Georgieva urged calm. “It’s crucial to avoid actions that could further harm the global economy. We urge the US and its trade partners to work collaboratively to ease trade tensions and minimize uncertainty.”

Little sign of moderation appeared in China’s strong response to the Trump tariffs. The state council tariff commission in China stated that the U.S. approach “violates international trade rules, seriously undermines China’s legitimate rights and interests, and constitutes a typical unilateral bullying practice.”

In Arlington, Virginia, on Friday, Powell indicated that the outlook remains too uncertain to determine the direction of monetary policy. “It’s too early to say what the appropriate policy stance should be. I understand the uncertainty people feel, but it’s a transitional process.”

He provided a stark assessment of the potential impact of Trump’s policies. “While uncertainty prevails, it’s now becoming evident that the tariff increases will be significantly larger than initially expected,” he noted. “The anticipated economic impacts, which will include higher inflation and slower growth, are likely to match this magnitude.”

The president has promised voters his “liberation day” policies will revitalize jobs and investment in the U.S. However, investors worry that the likely higher prices will stifle consumer demand in the U.S. and slow down export-dependent economies worldwide.

Market instability has also been exacerbated by Trump’s unpredictability, making it impossible to foresee whether he will negotiate some tariff reductions for concessions or opt for further escalation.

On Friday alone, Trump asserted “MY POLICIES WILL NEVER CHANGE,” yet four hours later mentioned he had a “very productive call” with the Vietnamese leader, To Lam, who, according to Trump, offered to reduce that country’s tariffs.

The U.S. Secretary of State, Marco Rubio, dismissed the Wall Street chaos on Friday, suggesting it was part of the administration’s strategy to reshape the U.S. economy.

“Markets are declining because they rely on the stock values of companies embedded in production modes detrimental to the U.S.,” he remarked.

Nonetheless, in the UK, some economists proposed the tariffs might have only a moderate impact. James Smith, an economist at ING, stated: “The overall impact of tariffs on Britain’s GDP is likely around 0.2%. Not enough to decisively shift the UK growth outlook. Keep in mind, there are positive growth factors this year, especially from government spending.”

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China retaliates strongly against Trump’s ‘bullying’ tariffs amid rising global recession concerns

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