Trade war between world’s two largest economies enters dangerous new phase
China has vowed to “fight to the end” in response to U.S. President Donald Trump’s threat of an additional 50% tariff on Chinese imports, signalling a deepening rupture in global trade relations as a deadline for the new levies looms.
On Tuesday, China’s Ministry of Commerce issued a sharply worded statement condemning what it called the “blackmailing nature” of the U.S. tariff threat, describing it as “a mistake on top of a mistake” and promising robust countermeasures if Washington proceeds.
“If the U.S. insists on its own way, China will fight to the end,” the Ministry said. “These threats are completely groundless and represent unilateral bullying. The countermeasures China has taken are aimed at safeguarding its sovereignty, security and development interests.”
The statement followed Trump’s declaration on Monday that unless Beijing withdrew its newly imposed 34% tariffs on U.S. products, he would retaliate with a further 50% tariff on all Chinese goods starting Wednesday, 9 April. These would come on top of a 20% base tariff already imposed this year, plus the 34% “reciprocal” tariffs Trump announced last week—bringing the cumulative U.S. tariff rate on China to as high as 104%.
Escalation amid collapse in talks
In a Truth Social post, Trump also announced the termination of all talks with China regarding requested trade negotiations:
“All talks with China concerning their requested meetings with us will be terminated!”
The decision appears to contradict earlier signals from Trump advisers that negotiations could remain open, raising uncertainty over whether the tariffs are a prelude to a negotiated settlement or a hardline reset of U.S.-China trade policy.
China, meanwhile, is preparing for long-term confrontation. Analysts suggest it may expand restrictions on rare earth exports, broaden the list of U.S. companies facing sanctions under its “unreliable entities” framework, and increase controls on agricultural imports from the U.S.
“What China can do is stop U.S. farming purchases, match U.S. tariffs, and expand export controls across the periodic table,” said Xu Tianchen of the Economist Intelligence Unit.
Currency moves and market intervention
The People’s Bank of China on Tuesday set the yuan’s reference rate at 7.2038 per dollar, its weakest level since September 2023—an apparent signal that Beijing may be willing to tolerate or even engineer further depreciation to offset tariff impacts.
“This is Beijing politely saying this is getting a little too much,” said Robin Brooks of the Brookings Institution. “This is a clear shot across the bow of Washington.”
Chinese state-owned firms, including China Chengtong and China Reform Holdings, have also committed to large-scale share purchases to support domestic stock markets, which plunged early in the week.
Hong Kong’s Hang Seng Index rebounded 2% on Tuesday after its worst one-day loss since 1997, while mainland Chinese blue-chips gained 0.7%, retracing some of Monday’s 7% drop. Japan’s Nikkei 225 rose 6%, buoyed by news of upcoming bilateral trade talks with the U.S.
Global fallout and investor fears
Global markets remain on edge. JPMorgan CEO Jamie Dimon warned of lasting damage, and hedge fund manager Bill Ackman predicted the risk of an “economic nuclear winter.”
Economists have warned the trade war could shave up to 2 percentage points off China’s GDP growth this year. The U.S. faces risks of inflation, supply chain disruption, and retaliatory pressure across agriculture, energy, and technology sectors.
“This is no longer about seeking gains—it’s a contest of endurance,” said Mary Lovely, trade expert at the Peterson Institute. “Both sides are signalling they can tolerate pain, and neither wants to blink first.”
No off-ramp in sight
While some U.S. allies and trade partners have rushed to negotiate exemptions or reciprocal pacts—Taiwan has proposed a zero-tariff deal—China appears unwilling to show concession under threat.
Chinese state media labelled Trump’s moves “naked extortion” and “coercion dressed up as policy.” On social media, Beijing has circulated clips of former U.S. President Ronald Reagan warning against the use of tariffs as a blunt policy instrument.
“China will never accept this approach,” said Foreign Ministry spokesman Lin Jian. “If the U.S. truly wishes to engage in dialogue, it must adopt a posture of equality, mutual respect, and benefit.”
For now, both sides are locked in what economists have likened to a high-stakes game of chicken, with the global economy along for the ride.
