The global trade war ignited by U.S. President Donald Trump took a dramatic turn on Friday 4 April, 2025 as China announced retaliatory tariffs of 34% on all U.S. goods, effective April 10.
The move, a direct response to Trump’s sweeping “Liberation Day” tariffs unveiled earlier this week, has sent shockwaves through financial markets, deepened fears of a global recession, and drawn sharp reactions from world leaders and economic institutions.
China’s Ministry of Commerce condemned Trump’s tariffs— which include a 34% levy on Chinese imports atop a 10% baseline tariff on all nations—as a “serious violation” of international trade rules. “This is unilateral bullying,” the ministry stated, vowing to “safeguard China’s legitimate rights and interests.” The announcement came less than 48 hours after Trump’s policy took effect, escalating tensions between the world’s two largest economies and threatening to unravel decades of global trade integration.
Markets Plunge Amid Recession Fears
Financial markets reacted swiftly and severely. Wall Street saw a sharp decline, with the Dow Jones Industrial Average dropping over 1,000 points in early trading, following a $2.4 trillion wipeout from U.S. equities the previous day. The S&P 500 recorded its steepest one-day loss since March 2020. In London, the FTSE 100 plummeted 419.76 points, a 4.95% drop, marking its worst day in five years. Asian markets, already battered by Trump’s initial announcement, extended losses, with Tokyo’s Nikkei index facing its worst week in years.
Oil prices also tumbled nearly 8% to their lowest since the pandemic, reflecting fears of reduced global demand. “This is a negative-feedback loop unfolding in real time,” said Rick Rieder, chief investment officer at BlackRock. “The trade war is no longer a hypothetical risk—it’s here, and it’s hitting hard.”
IMF, World Bank Sound The Alarm
The International Monetary Fund (IMF) and World Bank issued stark warnings about the escalating conflict. IMF Managing Director Kristalina Georgieva called Trump’s tariffs a “significant risk” to the global economy, urging the U.S. to resolve tensions with trading partners to avert a broader downturn. “There are no winners in a trade war,” she said, highlighting the potential for higher inflation and disrupted supply chains.
The World Bank echoed these concerns, noting that the tariffs could exacerbate sluggish global growth, with developing economies particularly vulnerable to a cascade of retaliatory measures.
Wall Street and the City of London, hubs of global finance, expressed similar unease. J.P. Morgan raised its estimate of a global recession by year-end to 60%, up from 40%, with strategists warning of a “spiral of doom” if retaliation continues. “Disruptive U.S. policies have been the biggest risk all year,” wrote Bruce Kasman, a J.P. Morgan strategist. “The effect of this tax hike will be magnified through supply chain chaos and a slide in business confidence.”
European Leaders Brace For Impact
European leaders voiced alarm as the trade war threatened to engulf the continent. European Commission President Ursula von der Leyen labeled Trump’s 20% tariff on EU goods a “major blow” to the world economy, signaling that the bloc was preparing countermeasures to protect its interests. “We cannot absorb global overcapacity or accept dumping on our markets,” she said, hinting at potential tariffs on U.S. exports if negotiations fail.
Germany’s outgoing Economy Minister Robert Habeck warned that the “tariff mania” could drag nations into recession, while UK Prime Minister Sir Keir Starmer promised a “cool and calm” response despite acknowledging economic pain.
Trump, White House Double Down
From Palm Beach, President Trump dismissed China’s retaliation as a misstep. “China played it wrong, they panicked—the one thing they cannot afford to do!” he posted on Truth Social.
Speaking to reporters aboard Air Force One, Trump insisted his policies were “going very well” and hinted at openness to “phenomenal” deals with countries seeking tariff relief.
The White House, however, offered no immediate concessions, with Treasury Secretary Scott Bessent having urged nations earlier this week to refrain from retaliation — a plea now seemingly ignored.
Global Reactions: Retaliation And Negotiation
Beyond China and Europe, other nations signaled their next moves. Canada’s Prime Minister Mark Carney announced a 25% levy on non-compliant U.S. vehicles, vowing to protect Canadian workers “with purpose and force.”
Vietnam dispatched its deputy prime minister to the U.S. for trade talks, while Japan’s Prime Minister Shigeru Ishiba called the tariffs a “national crisis” as banking shares tanked.
Australia’s Prime Minister Anthony Albanese criticised the U.S. measures as illogical but ruled out immediate retaliation, opting for dialogue.
In contrast, some nations held back. Japan, South Korea, Mexico, and India indicated they would seek concessions rather than impose immediate countermeasures, wary of further destabilising their economies.
“Significant retaliation could be the growth shock that drags us into recession,” warned Justin Onuekwusi, chief investment officer at St James’s Place.
A World On Edge
As the dust settles on China’s bold counterstrike, the global economy stands at a precipice. Economists warn that Trump’s tariffs, estimated to cost U.S. households over $1,900 annually, could reignite inflation and tip the U.S. into recession — a risk now uncomfortably high, according to Allianz’s Mohamed El-Erian.
For China, the tariffs threaten an export-led recovery, potentially forcing Beijing to pivot to alternative markets or double down on domestic stimulus.
With Trump showing no signs of backing down and China matching his aggression, the specter of a prolonged trade war looms large. “The global economy is fundamentally different today than it was yesterday,” Ishiba remarked — a sentiment echoed across capitals and trading floors as the world braces for what comes next.
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