Trump trade war escalates as China, EU counterattack

Trump trade war escalates as China, EU counterattack

'BE COOL!' Trump posted on social media

US President Donald Trump's trade war boiled over on Wednesday as China and the European Union adopted retaliatory tariffs against US goods, fuelling fresh market volatility.

Trump's latest salvo of tariffs came into effect on dozens of trading partners earlier Wednesday.

"BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!" Trump posted on his Truth Social platform following the Chinese and EU counterattacks.

In one of the most serious tests of China-US ties in recent decades, Trump ramped up the duties he had originally prepared for Chinese goods, finally raising them to 104 percent after Beijing said it would retaliate.

Beijing initially planned to impose a 34 percent tariff on imports of US products from 1601 GMT on Wednesday, but the finance ministry said it would now raise the toll to 84 percent after Trump hiked his tariff.

"The tariff escalation against China by the United States simply piles mistakes on top of mistakes (and) severely infringes on China's legitimate rights and interests," the ministry said.

Washington's moves "severely damage the multilateral rules-based trade system", it added.

China also said it would blacklist six American artificial intelligence firms, including Shield AI and Sierra Nevada Corp.

The European Union announced measures targeting more than 20 billion euros' worth of US products, including soybeans, motorcycles and beauty products, starting April 15.

The levies are in retaliation for US duties on global steel and aluminium exports imposed last month.

"These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome," the European Commission said after EU member states approved the measures. 

"The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy," it added.

The EU is still working on a response to the 20 percent levy that took effect on Wednesday.

- 'Cutting your own throat' -

US officials have warned nations against retaliating.

"I think what a lot of people are missing here is that the levels that were put out last Wednesday are a ceiling, if you don't retaliate," US Treasury Secretary Scott Bessent said at a US banking summit Wednesday.

Bessent warned countries that aligning with Beijing "would be cutting your own throat" as China is guilty of excess production and "dumping" inexpensive goods on other economies.

Trump believes his policy will revive America's lost manufacturing base by forcing companies to relocate to the United States.

"This is a GREAT time to move your COMPANY into the United States of America, like Apple, and so many others, in record numbers, are doing," Trump posted on Truth Social, adding "DON'T WAIT, DO IT NOW!"

But many business experts and economists question how quickly -- if ever -- this could take place and warn it could reignite inflation.

- Markets mixed -

The escalating trade war has wiped off trillions of dollars in market value since last week as investors fear that the trade war will spark a recession.

After some respite on Tuesday, stock markets were rattled on Wednesday.

Wall Street's main indexes were up in early morning deals while European stock markets were down around three percent in afternoon trading.

Tokyo's Nikkei index closed almost four percent lower.

The dollar fell against major currencies while oil prices fell below $60 a barrel, their lowest level in four years.

Government bond yields -- essentially the interest countries pay to borrow money -- rose in the United States, Japan and Britain, among other countries.

The Bank of England warned of risks to "UK financial stability" from increased geopolitical tensions, including the fallout from the US tariffs.

Italy is preparing to cut its 2025 growth forecast in half, to 0.6 percent from 1.2, a government source said, while Spain is also set to downgrade its outlook.

Trump has said his government was working on "tailored deals" with trading partners, with the White House saying it would prioritise allies such as Japan and South Korea, which were hit with tariffs of 24 percent and 25 percent, respectively.

His top trade official, Jamieson Greer, told the Senate that Argentina, Vietnam and Israel were among those who had offered to reduce their tariffs. 

Trump told a dinner with fellow Republicans on Tuesday night that countries were "dying" to make a deal.

"I'm telling you, these countries are calling us up kissing my ass," he said.

Trump also said the United States would announce a major tariff on pharmaceuticals "very shortly", prompting a sell-off in shares of pharmaceutical companies.

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Originally published as Trump trade war escalates as China, EU counterattack