The United States and China were headed towards an all-out trade war on Wednesday, locked in a high stakes game of brinkmanship as US president Donald Trump unleashed a new wave of tariffs against dozens of partners.
The global economy has been rocked since sweeping 10% US tariffs took effect over the weekend, triggering a dramatic market sell-off worldwide and sparking recession fears.
Rates on imports to the United States from dozens of economies rose further from 12.01am (0401 GMT) on Wednesday, with tariffs imposed on Chinese products since Trump returned to the White House reaching a staggering 104%. The new tariffs include rates of 20% on the European Union, 26% on India and 49% on Cambodia.
The new wave of tariffs had an immediate effect on some Asian markets, with Taiwan stocks falling 5.8% in afternoon trading and Japan’s Nikkei benchmark index diving 5%. At the same time the yen rallied 1% as investors sought refuge from impact of the new tariff regime. Hong Kong’s benchmark Hang Seng, was down 1.6%, but China’s market appeared to be weathering the storm after government interventions. Oil prices dropped to their lowest in more than four years.
They are tailored to specific countries based on a formula that has been criticised by economists that divides trade in goods deficit by twice the total value of imports.
“President Trump has a spine of steel and he will not break,” the press secretary, Karoline Leavitt, said on Tuesday. “And America will not break under his leadership.”
US stocks dropped on Tuesday for a fourth straight trading day since Trump’s tariffs announcement last week, with the S&P 500 closing below 5,000 for the first time in almost a year.
Several governments announced interventionist measures, including Taiwan, which pre-authorised emergency stabilisation funds for the stock exchange. Seoul announced a $2bn emergency support package for its auto sector, including financial support, tax cuts and subsidies. Trump’s 25% tariffs on imported cars and light trucks is expected to have a significant impact on Korea’s industry.
New Zealand’s central bank cut interest rates citing US tariffs, saying that “uncertainty about global trade policy (has) weakened the outlook”.
The US president believes his policy will revive America’s lost manufacturing base by forcing companies to relocate to the United States. But many business experts and economists question how quickly – if ever – this can take place, warning of higher inflation as the tariffs raise prices.
Scott Bessent, the US treasury secretary, has insisted the new tariffs are at “maximum” levels, and expressed confidence that negotiations will bring them down.
“I think you are going to see some very large countries with large trade deficits [with the US] come forward very quickly,” he told CNBC, the financial news network, on Tuesday. “If they come to the table with solid proposals, I think we can end up with some good deals.”
Trump was asked on Monday whether the tariffs set the stage for negotiations with countries, or were permanent. “Well, it can both be true,” he told reporters. “There can be permanent tariffs, and there can also be negotiations.”
Trump claimed on Tuesday the United States was “taking in almost $2bn a day” from tariffs. At an evening speech to Republican lawmakers, Trump said he would soon announce “major” tariffs on pharmaceutical imports, arguing the duties would push drug companies to move manufacturing operations to the US.
The administration has scheduled talks with South Korea and Japan, two close allies and major trading partners, and Italian prime minister Giorgia Meloni is due to visit next week.
“These are tailored, highly tailored deals,” Trump said at a White House event. “We’ve had talks with many, many countries, over 70, they all want to come in. Our problem is, can’t see that many that fast.”
Trump’s top trade official Jamieson Greer told the Senate that Argentina, Vietnam and Israel were among those who had offered to reduce their tariffs.
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Trump originally unveiled a 34% additional tariff on Chinese goods. But after China unveiled its own 34% counter tariff on American products, he vowed to pile on another 50% duty. Counting existing levies imposed in February and March, that would take the cumulative tariff increase for Chinese goods during Trump’s second presidency to 104%.
Beijing criticised what it called US blackmail and vowed to “fight it to the end”. Trump insisted the ball was in China’s court because Beijing “wants to make a deal, badly, but they don’t know how to get it started.”
On China’s social media, the tariffs made up half of Weibo’s daily trending topics on Wednesday. Users mocked the US and its egg shortage, with some accounts sharing pictures of empty shelves in US supermarkets. “If you can’t even handle an egg, why are you fighting a trade war,” one user wrote.
Weibo users also discussed the prospect of iPhones rocketing in price thanks to the tariffs, with several people saying that they would switch to using phones made by Chinese companies Huawei or Xiaomi.
Influential Chinese bloggers have suggested that China could restrict the import of American poultry and eggs as a countermeasure in the trade war, which would be a further blow to US farmers.
On Tuesday, Rachel Reeves, the UK chancellor, sought to ease concerns about market volatility, telling parliament she had spoken to Andrew Bailey, the governor of the Bank of England, who confirmed “markets are functioning effectively and that our banking system is resilient”.
A trade war “is in nobody’s interest”, Reeves argued, confirming that the UK was seeking to negotiate a new deal with the US. Trump has imposed a 10% tariff on UK exports, in line with the minimum benchmark introduced at the weekend.
The European Union has sought to cool tensions, with the bloc’s chief Ursula von der Leyen warning against worsening the trade conflict in a call with Chinese Premier Li Qiang.
She stressed stability for the world’s economy, alongside “the need to avoid further escalation,” said an EU readout.
French President Emmanuel Macron called on Trump to reconsider, adding if the EU was forced to respond “so be it.”
Agence France-Presse contributed to this report
