US President Donald Trump on Friday stood firm on his controversial tariff policy declaring it was “doing really well” even as China escalated the trade war by imposing fresh tariffs of up to 125 percent on American goods. The move intensified global market jitters sending shockwaves through currency, bond, and equity markets already on edge.
The economic showdown between the world’s two largest economies has reached a boiling point. Trump’s latest remarks came after Beijing retaliatory tariffs announced in response to his sweeping trade measures took markets by surprise. Investors rushed to dump US government bonds, the dollar plunged to a three-year low against the euro, and stocks fluctuated wildly.
Posting on his Truth Social network Donald Trump wrote, “We are doing really well on our tariff policy. Very exciting for America, and the World!!! It is moving along quickly.”
Despite the turmoil, the White House expressed optimism, saying Trump remained hopeful about reaching a deal with China and noting that 15 other countries had offers on the table during the 90-day pause in some US tariffs.
However, White House Press Secretary Karoline Leavitt struck a firmer tone, asserting, “The president made it very clear: when the United States is punched, he will punch back harder.”
China’s response was swift and steep. Following President Xi Jinping’s sharp comments against unilateral US trade actions, the Chinese government announced tariffs that nearly match the 145 percent level the US imposed on Chinese imports. Xi, during a meeting with Spanish Prime Minister Pedro Sanchez, called on the EU to “resist unilateral bullying practices,” clearly referencing the US.
A spokesperson from China’s Commerce Ministry dismissed Trump’s tariff approach as a “numbers game” that would soon “become a joke,” though China’s finance ministry confirmed no further hikes are planned since few imports would be viable at such extreme levels.
Still economic pressure is mounting. Trump told reporters on Thursday, “I think we’ll end up working out something that’s very good for both countries,” but US officials insist China must make the next move.
Market action revealed deep investor anxiety. As the dollar slumped, Trump attempted to calm fears, calling it “tremendous” and saying the US remained the world’s “currency of choice.” Meanwhile, yields on US government bonds rose signaling weaker demand amid speculation that China might be unloading its vast US debt holdingsa claim the White House denied.
Despite the turbulence, Wall Street ended the week on a high, buoyed by cautious optimism that the worst may be priced in. But not everyone is convinced the storm has passed.
US Federal Reserve policymakers warned that continued tariff escalations could slow growth and raise inflation, and analysts echoed those concerns. “The numbers are so high they don’t make sense anymore,” said Swissquote bank analyst Ipek Ozkardeskaya. “But China is now ready to go as far as needed.”
The European Union, initially targeted by Trump’s 20 percent tariffs, has so far held back on retaliation. Trump praised the EU’s restraint calling it “very smart,” but Brussels made clear that it was not without options.
EU Commission President Ursula von der Leyen told the Financial Times the bloc is prepared with “a wide range of countermeasures,” including tariffs on digital services that could hit major US tech firms.
EU Trade Commissioner Maros Sefcovic is expected to meet with US officials in Washington on Monday as diplomatic channels scramble to avoid further escalation.
As the tit-for-tat continues economists warn of rising consumer prices, supply chain disruptions and even the potential for a global recession. With both Washington and Beijing digging in, the trade standoff shows no sign of an easy resolution. For now world watches as two economic giants trade blows not just in goods, but in influence, policy and power.
