China will raise tariffs on all U.S. goods to 125%, up from 84%, effective Saturday, marking a significant escalation in the ongoing trade dispute between the world’s two largest economies. The increase matches the 125% rate currently levied by the United States on Chinese imports.
Beijing stated that while the new tariff aligns with U.S. actions, it does not plan further increases for now. However, a statement from China’s Ministry of Finance warned that continued U.S. tariff hikes would be met with a firm response. “At the current tariff level, there is no market acceptance for U.S. goods exported to China,” the ministry said. “If the U.S. insists on substantially infringing on China’s interests, China will resolutely counterattack and fight to the end.”
The announcement comes shortly after President Xi Jinping met with Spain’s Prime Minister Pedro Sánchez, where Xi called for a united international front against what he described as “unilateral bullying.” Xi emphasized that “there will be no winners in a tariff war,” while inviting the EU to collaborate in maintaining global trade stability.
Markets Roiled as Global Leaders Respond
U.S. financial markets reacted sharply ahead of the opening bell, with the S&P 500 and Dow Jones extending losses from earlier in the week. The dollar weakened nearly 2% against the euro following China's announcement. Asian markets also suffered, with Japan’s Nikkei falling nearly 5% and Hong Kong stocks heading for their worst weekly performance since 2008. Oil prices declined for a second consecutive week.
The tariff hike follows a temporary pause on broader U.S. tariff increases announced by President Donald Trump earlier this week. Trump suspended most of the “Liberation Day” tariff package for 90 days, reducing duties on affected countries to 10%. However, China was excluded from this reprieve.
“Based on the lack of respect that China has shown to the world’s markets, I am hereby raising the tariff charged to China by the United States of America to 125%, effective immediately,” Trump said in a social media post.
The White House said the move was in response to China’s initial 84% tariff on U.S. goods. Cumulatively, with past measures included, U.S. tariffs on Chinese imports now total 145%.
French President Emmanuel Macron called the 90-day suspension “fragile,” warning of continued uncertainty for global businesses. “This 90-day pause means 90 days of uncertainty for all our businesses, on both sides of the Atlantic and beyond,” he wrote on X.
Beijing Seeks Allies, U.S. Looks to New Trade Partners
As tensions grow, China is seeking to build alliances with other major economies. Xi has held recent discussions with leaders in Europe, the Middle East, and Africa. Premier Li Qiang also spoke with European Commission President Ursula von der Leyen, though the EU has yet to align with Beijing due to longstanding disputes.
Meanwhile, the U.S. is working to solidify trade partnerships in Asia. Vietnam has agreed to formal trade talks and committed to cracking down on Chinese goods rerouted through its territory. Taiwan and Japan have also signaled interest in negotiations.
Despite the ongoing tensions, Trump expressed optimism about reaching an agreement with China. “I’m sure that we’ll be able to get along very well,” he said. “In a true sense, [Xi] has been a friend of mine for a long period of time.”
Still, the Chinese government remains firm. “We will never sit idly by and watch while the legitimate rights and interests of the Chinese people are infringed,” said Foreign Ministry spokesperson Lin Jian. Alongside tariff retaliation, China has restricted imports of Hollywood films and placed 18 U.S. companies on trade restriction lists.
The dispute casts a long shadow over the nearly $700 billion in goods traded between the two nations last year, threatening to further destabilize global supply chains and investor confidence.