Global financial markets took a massive hit this week, losing $5 trillion in value after US President Donald Trump imposed new tariffs on Chinese imports, prompting retaliatory actions from Beijing and unsettling economies worldwide.
On Friday, Trump increased tariffs on Chinese goods by 34%, bringing the total US tariff on Chinese products to 54% this year. The new measures also removed a duty-free exemption for low-value Chinese imports and introduced a 10% baseline tariff on all global imports, with further hikes expected next week.
In response, China immediately imposed matching tariffs and export restrictions, particularly targeting rare earth materials crucial to various industries.
Chinese Foreign Ministry spokesperson Guo Jiakun shared a message on Facebook saying, “The market has spoken,” referencing the sharp drop in US markets and calling for “equal-footed consultation” between the two nations.
The market reactions were swift and severe. The S&P 500 dropped by 9% during the week, marking its worst performance since the pandemic. Oil and commodity prices plummeted, while investors flocked to government bonds for stability.
Starting Saturday, the US Customs began collecting the new tariffs, with a grace period until May 27 for shipments already en route. However, the higher “reciprocal” tariffs, up to 50%, are set to take effect next week, impacting the EU and China.
In the midst of this, industries have warned of inflation and job losses, with trade bodies in China predicting a potential US recession due to increased costs. France’s cognac industry, worth $1.1 billion annually in exports to the US, is already feeling the economic impact of new tariffs.
Trump has also threatened to increase wine and spirits tariffs to 200% if Europe imposes duties on US bourbon, adding further pressure to global trade.
Economists are cautioning that the escalating tariff war could significantly harm global growth, especially for vulnerable industries. China has urged the US to resume dialogue and cease its “wrong actions,” hoping for a resolution through negotiations.
