In a significant escalation of the ongoing trade war, China announced on Friday that it would raise tariffs on imports of US goods from 84% to 125%.
This increase in duties comes as a direct response to President Trump’s recently imposed tariffs and is set to go into effect on Saturday.
The countermeasures are expected to further exacerbate tensions between the two largest economies in the world and have already roiled US stocks.
Despite this escalation, Trump has instituted a 90-day pause on some tariffs while negotiating new trade deals with other partners, leaving investors wary.
Treasury Secretary Scott Bessent expressed confidence that the US would find clarity after the pause, indicating an intention to negotiate better agreements with allies.
Meanwhile, both Susan Collins, president of the Boston Fed, and John Williams, president of the New York Fed, have expressed concerns regarding the economic impact of Trump’s tariffs.
Collins noted in an interview that if tariffs remain in place, inflation could rise above 3%, while economic growth could slow significantly.
Williams echoed her sentiments, predicting growth may dip to around 1% and inflation could rise between 3.5% and 4%.
Companies are adopting a cautious wait-and-see approach, according to Collins, as they navigate an uncertain environment created by these tariffs.
The White House, on the other hand, claimed that they are receiving numerous inquiries from allies regarding trade as the US has paused tariffs on several countries.
Press Secretary Karoline Levitt asserted that allies need the US market and consumer base, indicating a general reliance on US trade relations.
In light of the tariffs, Volvo’s CEO stated that tariffs are making it unsustainable for the company to import cars in the long run due to the rapidly changing policy landscape.
Volvo is attempting to shift production to the US, but they indicated it would take at least two years to implement such changes.
Consumer sentiment in the US is also on the decline, according to reports, reflecting anxiety over ongoing trade tensions with China and the associated price increases for goods.
China’s Ministry of Finance rejected the notion that their tariff strategy is merely a game, stating that US exports to China are no longer commercially viable at current levels.
The Chinese government signaled its willingness to respond forcefully to continued uncertainty from the US, emphasizing the seriousness of their latest tariff increase to 125%.
In a related development, Thailand’s finance minister confirmed that the country will reduce tariffs on US corn imports, although the specifics are still being finalized.
This follows a significant tariff imposed by the US on Thailand, reflecting the broad implications of the US-China trade conflict.
Additionally, the US and India have reportedly finalized a framework for a trade deal, with hopes for a mutually beneficial agreement within the next 90 days.
Chinese electronics company Anker has already begun raising prices on its products sold on Amazon, citing the impact of rising tariffs on their supply chain.
This move highlights the immediate consequences of the tariff hikes as coming price increases are felt by American consumers.
Similarly, Tesla has halted orders for its US-made Model S and Model X vehicles in China, a direct consequence of the new tariff measures.
As the trade war escalates, President Trump reiterated his lack of concern over the stock market’s daily fluctuations, claiming to be unaware of any declines.
He encouraged a focus on the overall performance in the coming months, while officials like Treasury Secretary Bessent emphasized a positive long-term outlook amid the current turmoil.
The total tariff rate on China has now been clarified to be at least 145%, a figure that includes additional duties unrelated to recent trade moves.
This cumulative increase has contributed to the rising tensions in trade negotiations between the US and China, suggesting a lengthy standoff ahead.
Wall Street executives credited influential figures such as Jamie Dimon and Bill Ackman for swaying Trump’s decision to pause tariffs, attributing this to the fears of a market collapse.
Notably, the pause came after a historic rally on Wall Street, but pressure on trading partners and tariffs remain a contentious topic of discussion.
Within the Republican Party, frustrations are growing as lawmakers express confusion over Trump’s tariff logic, highlighting a divide in understanding the trade policy’s direction.
The EU has also indicated a temporary pause in its retaliatory tariff plans, granting an opportunity for negotiations with the US to occur.
This reprieve is contingent on the progress made in talks regarding trade relations, as the EU prepares to respond to US measures should talks fail to yield satisfactory outcomes.
As the trade war continues, various industries, including bicycle manufacturing, face the likelihood of significant price increases due to the impact of tariffs.
Trade executives are warning that the optimism seen in recent import growth may not sustain, as shifting tariff policies cloud the outlook for the year.
Overall, the landscape of US-China trade relations is fraught with uncertainty, as both nations escalate their tariff measures while seeking to navigate a path toward future negotiations.
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