China has hit back hard against what many economic analysts tagged as Donald Trump’s “bullying” tariffs, raising fears that the escalating trade war could trigger a global recession and prompting fresh turmoil in financial markets.
Beijing retaliated on Friday with punitive 34% additional tariffs on all goods imported from the US, mirroring the US decision and exacerbating a sell-off on global stock markets.
According to the Gurdian UK, almost $5tn (£4tn) has been wiped off the value of global stock markets since Trump’s Rose Garden address on Wednesday evening, analysts calculated.
In the UK, the FTSE 100 index of leading shares closed more than 7% lower than Monday – its worst week’s trading since late February 2020, when anxiety about the Covid-19 pandemic was gripping the markets.
The dramatic escalation in trade hostilities between the world’s two largest economies magnified concerns among investors about the risks to global growth.
The chair of the US central bank, the Federal Reserve, warned the trade war would mean “higher inflation and slower growth”, as Jerome Powell resisted Trump’s calls to cut interest rates.
The International Monetary Fund (IMF) also warned the escalating trade war was likely to hit global economic growth. The tariffs “clearly represent a significant risk to the global outlook at a time of sluggish growth,” said the 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, taking the total levy to 54%.
He also imposed hefty tariffs on neighbouring countries in south-east Asia including Vietnam, Cambodia and Thailand, through which billions of dollars of Chinese exports are processed on their way to the US.
The US President responded on his social media platform Truth Social on Friday saying: “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!”
The UK chancellor, Rachel Reeves, said ministers would continue to negotiate with Washington, in the hope that the 10% levy on UK exports could be lifted. The UK is offering a series of concessions, including a cut to the £1bn-a-year digital services tax for some of the biggest tech firms.
“We want to do everything in our power, and we’ll continue to do everything in our power to get the best possible deal for British industry, working closely with them to protect prosperity and jobs here in the UK,” she said.
