China Hits Back With 84% Levy, After Trump Doubled US Tariffs

The intensity of the US-China trade dispute cranked up further on Wednesday when Beijing said it would raise its tariff on US imports to 84%.

The move turns up the heat in the two biggest economies’ escalating trade war. China’s 50% hike came after the US imposed a similar additional tariff on Chinese goods that brought total levies to 104%.

China’s response is due to start on Thursday, according to media reports on the Finance Ministry announcement. It comes as no surprise given earlier remarks that China would “fight to the end” against what it described as “blackmail” by the US.

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“If the US insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the Ministry of Commerce wrote in a document released on Wednesday.

Earlier, China’s State Council Information Office released a white paper that said the country “does not deliberately pursue a trade surplus,” but described that outcome as an inevitable result of “structural issues” in the US and differences in labour costs.

It warned that China had the “determination and means” to continue the trade fight if the US kept hitting Chinese goods with tariffs, which have rocked dozens of other countries and look set to reconfigure global trading patterns.

Trump has imposed “reciprocal” tariffs on dozens of economies he accuses of “ripping off” the US by selling goods into the world’s largest consumer economy while maintaining trade barriers that inhibit US firms’ market access.

China’s trade surplus with the US widened to $295.4 billion last year from $279 billion in 2023, according to US Census data.

“There are no winners in a trade war,” China’s Commerce ministry said in a statement accompanying the report launch. “China does not want one, but the government will never allow the legitimate rights and interests of the Chinese people to be harmed or taken away.”

“The United States is using tariffs as a tool to exert maximum pressure for selfish gains – this is classic unilateralism, protectionism and economic bullying,” it said.

Markets in turmoil

The punishing US tariffs have shaken a global trading order that has persisted for decades, raising fears of recession and wiping trillions of dollars off the market value of major firms.

Analysts have been warning that US ties with China looked poise to deteriorate because of Trump’s focus on trade imbalances and his strong belief that tariffs can help rejuvenate American manufacturing.

But many investors fear his tariffs policy is far too risky and plagued by uncertainty over whether it is a long-term strategy or just a negotiating ploy to help the US negotiate better deals with its trading partners.

Over the past week, the S&P 500 has suffered its deepest loss since the benchmark’s creation in the 1950s. It is now nearing a bear market, defined as 20% below its most recent high.

The Nikkei was down nearly 4% on Wednesday, although both the Hang Seng Index in Hong Kong and the blue-chip Shanghai Composite edged up, amid reports of state support, while many other Asian markets slipped.

US Treasuries have also been caught up in the market turmoil and extended heavy losses on Wednesday in a sign investors are dumping even their safest assets and the dollar, a traditional safe-haven, was weaker against other major currencies.

European shares fell and US stock futures pointed to more pain ahead, following a grim session for most of Asia.

Japan will cooperate with the Group of Seven advanced economies and the International Monetary Fund to help stabilise markets, the country’s top currency diplomat said.

“Cooperation needs to be international to prevent market instability,” Atsushi Mimura told reporters.

Trump has shrugged off the market rout and offered investors mixed signals about whether the tariffs will remain in the long term, describing them as “permanent” but also boasting that they are pressuring other leaders to ask for negotiations.

“I am telling you, these countries are calling us up, kissing my ass,” Trump told a Republican event on Tuesday in Washington.

“They are dying to make a deal. ‘Please, please sir, make a deal. I’ll do anything, I’ll do anything sir,'” Trump said in a mocking imitation of a foreign leader.

Europe, China, Canada pushing back

European Union countries are expected to approve the bloc’s first countermeasures against Trump’s tariffs on Wednesday, joining China and Canada in pushing back.

The European Commission, which coordinates EU trade policy, has proposed extra duties, mostly of 25%, on a range of US imports from motorcycles, poultry, fruit, wood, and clothing to dental floss, according to a document seen by Reuters.

They are to enter force in stages.

Trump’s tariffs are expected to cause a bigger hit to eurozone economic growth than initially estimated by the European Central Bank, although inflation may also be lower in the short term, four sources told Reuters.

The ECB stands ready to ensure the sound financing of the eurozone economy and financial stability, French ECB policymaker Francois Villeroy de Galhau said.

Chinese discuss plans

Trump nearly doubled duties on Chinese imports, which had been set at 54% last week, in response to counter-tariffs from Beijing.

With hopes of a trade deal appearing to decline, China’s top leaders met on Wednesday to hammer out measures to boost the economy and stabilise capital markets, people with knowledge of the matter said.

China’s currency has faced heavy downward pressure, with the offshore yuan at record lows due to the tariffs, but sources told Reuters the central bank has asked major state-owned banks to reduce US dollar purchases and will not allow sharp yuan declines.

Central banks in New Zealand and India cut rates on Wednesday in what could presage a broader move by policymakers to try to cushion the tariff hit to their economies. The duties are another argument for cutting interest rates in Poland, central banker Ludwik Kotecki said.

US consumers face higher prices

Some economists have warned that US consumers are likely to bear the brunt of the trade war, facing higher prices on everything from sneakers to wine.

Nearly three-quarters of Americans expect the prices of everyday items to rise in the next six months, a new Reuters/Ipsos poll found.

Danish luxury stereo maker Bang & Olufsen said on Wednesday it would raise prices on selected products next month to account for the tariffs and other factors.

The full effects of Wednesday’s tariffs may not be felt for some time, as any goods already in transit as of midnight will be exempt from the new levies as long as they arrive in the US by May 27.

Trump says the tariffs, which took effect at 12:01am ET (0401 GMT), are aimed at countries that “rip off” the US. That list includes many of the United States’ closest allies.

Trump has said his tariffs are a response to barriers put on US goods and are needed to fix America’s trade imbalances. He has also signaled he may not be finished, telling Republican lawmakers he may announce duties on pharmaceutical imports.