China and the US are trapped in an escalating war of words backed by the threat of new tariffs ahead of a critical deadline that threatens to bring the already volatile global economy into a deeper crisis.
Last Thursday, President Donald Trump’s “liberation day” tariffs put China in high tariffs on US exports, with a minimum of 10% in all other countries exporting to the US. The announcement plunged global stock markets into chaos as investors’ trust fell across the world.
Beijing has since retaliated with its own tariff hikes, while other countries have fought over negotiations for trade deals with Washington.
But on Monday, Trump raised temperatures with China even further, threatening more tariffs unless Beijing withdraws its latest collection of US goods. China responded, saying it would not retreat.
It continues to volatility in global stock markets this week amid fears that the trade war could get significantly worse.
Here’s what you need to know about spats between the two biggest economies in the world:
What’s the latest?
Last Friday, China announced a 34% extra charge on US imports two days after Trump announced an increase in the same tariffs on Chinese imports.
But in a post about his true social network on Monday, Trump threatened to increase tariffs on China if Beijing did not recoup the latest taxes by Tuesday.
A new threat? 50% tariffs in addition to a 54% effective US tariff on Chinese imports.
Trump said China has announced its tariffs. “A country that retaliates against the US by issuing additional tariffs will soon be filled with new, substantially higher tariffs,” despite my warning.”
“If China does not already outweigh long-term trade abuse by 34% by tomorrow, April 8, 2025, the US will impose additional tariffs on 50% of China on April 9,” he posted.
Trump also said his administration would cancel negotiation talks that he allegedly requested by Chinese officials regarding tariffs. He said talks will progress for other countries that wish to negotiate.
“Negotiations with other countries requesting meetings will begin to take place soon. Thank you for paying attention to this issue!” he posted.
How did China respond?
China’s Commerce Department took a militant stance in a statement Tuesday, saying Washington’s actions were “completely unfounded” and “bullying.”
China said it aims to defend mutual tariffs it has imposed, protecting “sovereignty, security and development interests,” and to maintain a balanced international trade market.
Beijing added that if Trump advances more tariffs, he is ready to “fight to the end.”
“The US threat to escalate China’s tariffs is wrong, as well as mistakes, and again exposes the threatening nature of the US. China will never accept this. If the US claims in its own way, China will fight to the end.”
What is the background to this?
Last Wednesday, Trump’s tariff announcement struck almost every US trade partner and piqued the market. Some analysts call it “worst than the worst case scenario.”
The president has announced a baseline 10% tariff on all imports into the United States. He further announced much higher obligations in dozens of other countries that the US claimed to unfairly tax the goods and call them “the worst criminals.”
Lesotho, a small nation in southern Africa, was slapped at 50% at the highest tariffs on the list.
China, the US’s third largest trading partner, considers imports of more than $4300 billion a year, and saw one of the 34% higher taxes. However, China was already under the taxes placed on exports to the US.
Since taking office in January, Trump has imposed a 10% tariff on Chinese products. The first was February 1st, and the rate doubled on March 4th. Therefore, the new announcement of 34% collection last week marked 54% of the total tariffs in China.
If Trump excels at his threat on Tuesday, China’s imports will be subject to 104% tariffs.
China was also responding to previous tariffs imposed with its own measures. On March 10th, it announced a 10-15% tariff on US imports. The 34% additional tariffs announced Friday will bring total tariffs on US imports to 44-49%.
China has also restricted the export of important rare earth elements used to manufacture gadgets to the United States, and has banned the export of double-use items that can be used by some US defense companies for military or civilian purposes.
What will happen to both economies?
While both countries appear to be ready to escalate, experts say they are already facing the effects of the trade war.
Oil prices are falling, interest rates are falling (the slow moving Fed should cut interest rates!), food prices are falling, there is no inflation, and the abused US is bringing billions of dollars a week from abused countries with already in place tariffs. this is…
– Donald J. Trump (@RealdonaldTrump) April 7, 2025
Tariffs were a major shock for Chinese companies, where the US is a key export market. Most of China’s exports to the US are electrical goods and vehicles. Meanwhile, the US exports mainly agricultural products, machinery, aircraft and pharmaceuticals to China.
Analysts hope that despite Beijing’s bravery, China’s market will shrink due to US tariffs. According to Morgan Stanley, the Chinese economy could fall below 1.5-2 points this year.
In addition to matching the tariff hike, experts say China can test further retaliation measures in the US, including halting imports of US agricultural products and further restricting exports of critical metals and minerals to the US.
Meanwhile, US stocks saw a volatile closing on Monday. The S&P 500 fell 0.2%, while the Dow Jones industrial average fell 349 points (0.9%). Nasdaq composites rose 0.1%.
The stocks have climbed temporarily after social media users claimed after social media users said Kevin Hassett, the economic adviser of the top White House, said the president was considering suspending tariffs. However, in X’s White House post, it is called “fake news.”
President Trump has also ruled out the suspension. In a post on X on Monday, Trump said the US “bringed billions of dollars a week from abused countries around tariffs already in place.”
“This despite the fact that China’s biggest abusers, whose market is crashing, have just raised tariffs by 34%, and have not acknowledged the warning not to abuse abuse,” he added.