China retaliates with 84% tariffs as the intensifying trade war impacts markets

China will implement an 84% tariff on U.S. goods starting Thursday, a significant increase from the previously announced 34%, according to the finance ministry’s statement on Wednesday. This move marks the latest escalation in a global trade conflict initiated by U.S. President Donald Trump.

Earlier on Wednesday, Trump’s “reciprocal” tariffs took effect, which include a staggering 104% duty on Chinese products.

The European Union is also gearing up to announce its own retaliatory actions later on Wednesday.

Trump’s aggressive tariffs have disrupted a long-standing global trading system, heightened recession fears, and resulted in a loss of trillions in market value for major corporations. In response to China’s earlier counter-tariffs, Trump nearly doubled the duties on Chinese imports from 54% to the new rate.

Earlier in the day, China characterized its trade surplus with the U.S. as inevitable and asserted its “determination and means” to continue the trade battle if Trump persisted with tariffs on Chinese goods. The Chinese currency has come under significant downward pressure, with the offshore yuan hitting record lows due to the tariffs. However, sources informed Reuters that the central bank has instructed major state-owned banks to limit U.S. dollar purchases and will prevent sharp declines in the yuan’s value.

Additionally, China has communicated to the World Trade Organization that the U.S. tariffs pose a threat to global trade stability. “The situation has dangerously escalated… As one of the affected members, China expresses grave concern and firm opposition to this reckless move,” China stated in a message to the WTO on Wednesday, which was relayed to Reuters by the Chinese mission to the organization.

MARKET DECLINE

Since Trump announced his tariffs last Wednesday, the S&P 500 has experienced its most significant decline since the index’s inception in the 1950s, approaching bear market territory, defined as a 20% drop from its most recent peak.

U.S. Treasuries experienced significant declines on Wednesday amid market volatility, indicating that investors are offloading even their most secure assets. Concurrently, the dollar, typically regarded as a safe haven, weakened against other major currencies.

European stock markets declined, and U.S. stock futures suggested further challenges ahead, following a difficult trading day for much of Asia.

Former President Trump has downplayed the market downturn, sending mixed messages regarding the long-term status of tariffs. He referred to them as “permanent” while also claiming they are compelling other leaders to seek negotiations.

European Union member states are anticipated to endorse the bloc’s initial countermeasures against Trump’s tariffs on Wednesday, aligning with China and Canada in their response. The European Commission, responsible for EU trade policy, has suggested imposing additional tariffs, primarily at a rate of 25%, on various U.S. imports, including motorcycles, poultry, fruits, wood, clothing, and dental floss, as outlined in a document reviewed by Reuters. These tariffs are set to be implemented in phases.