Key Takeaways:
- China warns of full-scale retaliation if the US imposes an additional 50% tariff hike.
- The US plans would bring total 2025 tariffs on Chinese goods to 104%.
- Markets react: yuan weakens, Hong Kong stocks rebound with state-backed support.
- Diplomatic ties fray, with no communication between Trump and Xi since inauguration.
Trade Tensions Rise: China Promises Retaliation as Trump Threatens Further Tariffs
The US-China trade conflict entered a sharper phase this week after Beijing firmly rebuked Washington’s latest tariff threats and vowed to retaliate if the measures are enacted. The Chinese Ministry of Commerce responded Tuesday with a strongly worded statement calling the US approach “a mistake on top of a mistake” and accusing the US of “extortion.”
“If the US insists on its own way, China will fight to the end,” the ministry warned.
This comes just hours after US President Donald Trump announced plans for a fresh 50% import duty on Chinese goods, should Beijing proceed with retaliatory tariffs of its own. The new levy would add to the 34% reciprocal tariff set to take effect on April 9, as well as an earlier 20% hike—bringing the total cumulative 2025 tariffs to a staggering 104%. According to the White House, this effectively doubles the cost of any product imported from China into the US.
The confrontation, marked by increasingly hardened positions, threatens to plunge the world’s two largest economies into a long-term trade decoupling.
Michelle Lam, Greater China economist at Société Générale, cautioned,
“The rhetoric from China is strong. Without Trump backing down, investors may need to prepare for trade decoupling between both countries.”
Markets responded swiftly to the tension. China’s onshore yuan weakened to its lowest level since 2023 after the People’s Bank of China loosened its grip on the currency. However, Chinese equities mounted a partial recovery following steep losses on Monday. A Hong Kong index tracking mainland companies rebounded by as much as 3.7%, buoyed by signals of support from state-backed funds.
Despite the aggressive language, China also extended an olive branch, calling for renewed dialogue to resolve disputes. However, prospects for diplomacy remain dim. President Trump indicated Monday that all talks would be “terminated” unless China took unspecified actions, further clouding the outlook for negotiations.
The impasse is also reflected in top-level diplomacy—or lack thereof. Trump has not spoken with Chinese President Xi Jinping since returning to office, marking the longest post-inauguration silence between US and Chinese leaders in two decades.
With each side digging in, markets, businesses, and global investors are bracing for a prolonged economic standoff that could reshape global trade dynamics well beyond 2025.
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