Stock markets around the world plunged for a second day on Friday as China announced retaliatory tariffs of 34% on US imports, signalling a major escalation of a trade war ignited by Donald Trump and feeding fears of a global recession.
“For all imported goods originating from the US, an additional tariff of 34% on top of the current applicable tariff rate will be imposed,” Beijing’s finance ministry said.
China’s commerce ministry said that it would also impose more restrictions on the export of rare earths, which are used in hi-tech manufacturing such as batteries and electric vehicles. It added a further 16 US companies and organisations to its export control list, meaning that Chinese companies are restricted from doing business with them.
China had previously promised “resolute countermeasures” against Trump’s tariffs, which slapped a 10% rate on all imports coming to the US, with extra levies for certain countries, including China.
China’s state council tariff commission said: “On April 2, 2025, the US government announced the imposition of ‘reciprocal tariffs’ on Chinese goods exported to the US. This practice of the US is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice.”
Trump responded on Truth Social on Friday. He said: “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!”
Trump’s announcement on Wednesday led to a plunge in world financial markets and fuelled fears of a global recession. Investment bank JP Morgan said it now sees a 60% chance of the global economy entering recession by the year end, up from 40% previously.
Escalation of a trade war featuring the world’s two largest economies sent US stock futures sharply lower on Friday, signalling more losses on Wall Street, after the Trump administration’s sweeping levies knocked off $2.4tn (£1.8tn) from US equities.
The FTSE 100 in London shed more than 300 points since the start of trading on Friday, its biggest one-day decline since March 2023. The Stoxx 600 index of Europe’s largest six hundred companies slumped by 4.4%.
The price of Brent crude oil has dropped 6.6% to $65.50, its lowest since August 2021.
Wang Wen, the dean of Renmin University of China’s Chongyang Institute for Financial Studies, said: “China will never give in to Trump, but it does not exclude cooperation with the United States at the level of mutual respect and win-win cooperation. China knows that cooperation is not sought, but fought for.” Wang said that China’s response was “restrained” and limited to trade measures.
However other analysts said that China’s response was forceful.
Stephane Ekolo, a market and equity strategist for Tradition in London, told Reuters: “China comes out swinging with an aggressive response to Trump’s tariffs. This is significant and is unlikely to be over, hence the negative market reactions. Investors are afraid of a ‘tit for tat’ trade war situation.”
Some analysts had expected the US and China to reach a deal before the 9 April deadline for the US’s tariffs to take effect. The Financial Times had reported that Trump was considering using the threat of tariffs to pressure Beijing into allowing ByteDance to sell off TikTok to a US entity.
Shameen Prashantham, a professor at the China Europe International Business School in Shanghai, said the mounting trade war was a body blow to global trade. “I just can’t see how there are going to be many winners in this,” Prashantham said.
China’s industry associations have unanimously condemned the tariffs. China’s National Textile and Apparel Council said that it “supported the government’s forceful measures” and that the US had “damaged the resilience of the global textile industry’s supply chain”.
Chinese fast fashion companies are expected to be particularly badly hit by the new tariffs. Temu and Shein have grown to dominate the e-commerce industry in the US thanks to a loophole in the US’s import rules, which allowed goods valued at less than $800 to be shipped to the US for free. Trump has now closed that loophole, effective from 2 May.
About 60% of duty-free packages coming into the US come from China. But those deliveries will, from May, be subject to a fee of 30% of the value of the goods, or $25, rising to $50 in June.
Temu and Shein have yet to comment.
China has also filed a lawsuit against the US with the World Trade Organization.
