The US-China trade war is getting even uglier

Huileng Tan

Mon, Apr 7, 2025, 10:13 PM 4 min read

• The US-China trade war has escalated with sweeping new tariffs and fresh export bans from Beijing.

• Trump is threatening 50% tariffs on top of the 54% he's already announced.

• Beijing calls that "a mistake on top of a mistake" and vowed its own countermeasures.

The US and China could be heading for a long standoff in their trade war, risking collateral damage for economies and markets the world over.

On Friday, China announced sweeping retaliatory tariffs of 34% tariff on all US imports — showing that Beijing isn't taking President Donald Trump's tariffs lying down. The world's second-largest economy also announced fresh export bans on rare earths.

On Monday, Trump hit back with a fresh threat of an additional 50% in tariffs on China — on top of a total 54% he announced since taking office — if Beijing doesn't withdraw its retaliatory tariffs.

On Tuesday, the row between the world's two largest economies intensified, with China's Commerce Ministry calling Trump's latest threat "a mistake on top of a mistake."

"If the US insists on its own way, China will fight to the end," said a spokesperson from the ministry in a statement. The ministry vowed countermeasures if more US tariffs are put in place.

The intensifying spat between the world's two largest economies contributed to a worsening market rout globally.

"Unlike the previous two rounds, in which the tit-for-tat tariff response was more restrained, targeting some specific categories of US imports, this time, Beijing announced a plain, simple and blanket tariff hike," wrote Nomura economists on Monday.

The trade war will be painful for Americans — and for everyone else.

"Near-term pain all around (US included!) is guaranteed if the US does not dial-back on blanket tariffs as industries are hit by margin squeeze and households are hammered by acute affordability woes," wrote Vishnu Varathan, Mizuho's head of macro research for Asia excluding Japan, in a Monday note.

Some Americans are already snapping up essential items to beat price inflation that's likely to set in as importing companies pass on the cost of tariffs to consumers. Others are slowing purchases of luxury items, Business Insider reported last week.

Meanwhile, many are witnessing their investments slump due to a historic global stock rout as markets sound the alarm on a potential economic downturn.

"Needless devastation by way of collateral damage all around will be hard to avert as aggregate demand slumps accentuated by a sharp drop in demand for capital goods as uncertainty paralyzes investments," wrote Varathan.