In a dramatic escalation of the ongoing trade war, China has raised its retaliatory tariffs on US imports to a staggering 125%, effective immediately. This move comes in response to President Donald Trump’s decision to increase tariffs on Chinese goods to 125%, citing a lack of respect from China towards global markets. The tit-for-tat tariffs have led to significant market volatility, with the US dollar sinking to a three-year low against major currencies.
Market Reactions
The financial markets have been in turmoil as investors react to the escalating trade tensions. The Dow Jones Industrial Average plunged over 1,700 points, the S&P 500 fell by 4.89%, and the Nasdaq Composite dropped by 5.78%. The US dollar’s decline has been exacerbated by the flight to safety, with gold prices soaring to near all-time highs. The market’s reaction underscores the deep concerns about the potential economic fallout from the trade war.
Trump’s Tariff Pause
In an attempt to mitigate the immediate impact of the tariffs, President Trump announced a 90-day pause on reciprocal tariffs for over 75 countries, excluding China. This pause aims to provide a window for negotiations and reduce market uncertainty. However, the increased tariffs on China remain in effect, highlighting the ongoing tensions between the two nations.
WTO’s Warning
The World Trade Organization (WTO) has warned that the escalating trade tensions between the US and China could lead to a significant contraction in bilateral trade, potentially reducing it by as much as 80%. WTO Director-General Ngozi Okonjo-Iweala emphasized the need for cooperation and dialogue to resolve the issues within a cooperative framework.
Summary
The escalating trade war between the US and China has led to significant market volatility and a decline in the US dollar. China’s retaliatory tariffs on US goods have reached 125%, while President Trump has imposed a 125% tariff on Chinese imports. Despite a temporary pause on tariffs for most countries, the future of US-China trade relations remains highly uncertain, with potential long-term economic consequences.