China and the European Union have announced new trade barriers on US goods in response to steep duties imposed by US President Donald Trump, escalating a global trade war that has hammered markets and raised the likelihood of recession.
China announced a tariff hike on US imports to 84 per cent from 34 per cent on Wednesday, shortly after Trump’s punitive 104 per cent tariffs on Chinese imports kicked in, as a standoff between the world’s two largest economies showed no signs of resolution.
The EU said it would impose 25 per cent tariffs on a range of US imports in a first round of countermeasures. The 27-member bloc faces US tariffs of 20 per cent on most products and higher duties on autos and steel. ountermeasures in Canada, a close US ally and major trading partner, also took effect on Wednesday.
Targeted US duties on dozens of other countries, from Japan to Madagascar, also took effect, the latest in a thicket of tariffs that are unwinding a global trading order that has been in place for decades. Tariffs in the world’s largest consumer market now average above 20 per cent, according to various estimates, up from 2.5 per cent before Trump took office.
JPMorgan Chase CEO Jamie Dimon, a prominent voice on economic matters, said Trump’s tariffs would probably lead to a recession and defaults by borrowers.
Global markets took a pummeling, with the damage spreading beyond stock markets that have seen trillions of dollars in equity evaporate over the past week. Oil prices plunged to four-year lows, while investors dumped US Treasury bonds and the dollar, which are typically seen as safe havens.
Japan and Canada said they would cooperate to stabilise the global financial system – a task usually taken on by the United States during times of crisis.
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.
“BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” he wrote on social media.
Trump has said the tariffs will help rebuild an industrial base that has withered over decades of trade liberalisation, though he says he is open to negotiating down those barriers with trading partners on a country-by-country basis. US officials, however, say they will not prioritise talks with China.
“The US escalation of tariffs on China is a mistake on top of a mistake, which seriously infringes on China’s legitimate rights and interests and seriously undermines the rules-based multilateral trading system,” China’s finance ministry said in a statement.
Beijing also imposed restrictions on 18 US companies, mostly in defence-related industries, adding to the 60 or so American firms already punished over Trump’s tariffs.
The White House had no immediate comment on China’s latest retaliatory move. Earlier on Wednesday, China called its trade surplus with the United States an inevitability and warned it had the “determination and means” to continue the fight if Trump kept hitting Chinese goods.
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 would not allow sharp yuan declines.
US stock indexes were mixed at the open on Wednesday. Since Trump unveiled his tariffs on April 2, the S&P 500 has suffered its deepest loss since the benchmark’s creation in the 1950s.
Global drugmakers’ stocks dropped across the board on Wednesday after Trump reiterated plans for a “major” tariff on pharmaceutical imports on top of existing duties.
Economists say Trump’s tariffs could increase costs for the average US household by several thousands of dollars annually, which could become a political liability for a president who campaigned on lowering the cost of living. Three out of four Americans expect prices to increase due to Trump’s tariffs, according to a Reuters/Ipsos poll.
Opposition Democrats, locked out of power in Washington, have struggled to form a coherent response. Some have blasted the tariffs as counterproductive, but others have said that Trump is simply going too far.
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