A fresh round of tariffs from Donald Trump’s White House has thrown global markets into a tailspin. From Sydney to Frankfurt, investors are dumping equities as fears grow of a prolonged and punishing trade war between the U.S. and China—and now, the rest of the world.
The key trigger: a 104% levy on Chinese goods, part of a sweeping new set of tariffs that came into effect at 04:01 GMT Wednesday. The result? Trillions in market value erased, central banks on high alert, and China preparing a volley of retaliatory measures.
“The move will not help to solve domestic economic problems in the U.S., but will ultimately backfire,” China said in a newly published white paper, branding the U.S. strategy as “coercive” and “self-defeating.”
Stocks Rattled Across the Board
The pain was immediate and widespread:
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Japan’s Nikkei 225 plunged more than 3%
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Taiwan’s benchmark index slumped 5.8%
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Hong Kong’s Hang Seng fell over 3%
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Australia’s ASX 200 shed 2%, wiping billions in value
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European bourses opened sharply lower, with the FTSE 100 and DAX both in the red
Currency markets fared no better. The South Korean won touched its lowest level since 2009, while China’s yuan fell to a 19-month low after its central bank weakened the reference rate for a fifth consecutive day.
Oil joined the slide, with WTI crude dropping below $60 for the first time since April 2021.
A Global Risk-Off Moment
In bond markets, the panic is just as palpable. Investors are fleeing risk and flocking to safety. U.S. government bonds faced a steep sell-off overnight, and European yields widened across the curve.
Meanwhile, India’s central bank responded with a rate cut, citing the “challenging” global macro environment.
“There’s a real sense of alarm,” said one London-based fund manager. “This isn’t just tariffs on China. This is Trump throwing a wrench into global trade.”
China: “We Will Fight to the End”
Beijing wasted no time in signaling its stance. In a lengthy white paper published Wednesday morning, the Chinese government called the new tariffs an “escalation of economic pressure” and promised countermeasures, including a 34% retaliatory tariff on U.S. goods starting Thursday.
The report, which spans dozens of pages, reiterates grievances over U.S. trade policy, sanctions, and rhetoric on human rights in Xinjiang and Hong Kong. It also accused the U.S. of using fentanyl as a “pretext” for economic coercion.
“Trade wars produce no winners, and protectionism leads up a blind alley,” the white paper said. “The U.S. side is expected to join forces with the Chinese side to pull in the same direction pointed out by the two heads of state.”
Trump: “These Countries Are Calling Us Up Kissing My Ass”
Speaking at a dinner with Republican lawmakers Tuesday night, Trump struck a defiant tone.
“I’m telling you, these countries are calling us up kissing my ass,” he told attendees, according to sources in the room. “They’re dying to make a deal.”
His administration has promised “tailored deals” for allies, with trade officials confirming talks with Japan, South Korea, Vietnam, Argentina, and Israel. The strategy? Use the pressure of tariffs to renegotiate bilateral terms more favorable to the U.S.
What Comes Next?
With China and the U.S. locked in a war of attrition, analysts warn the outlook could get worse before it gets better.
“This is now a full-blown global trade conflict,” said a strategist at Nomura. “And unlike previous skirmishes, the damage is immediate and deeply systemic.”
All eyes now turn to Thursday, when China’s countermeasures take effect. Meanwhile, European Commission President Ursula von der Leyen has urged calm, speaking with Chinese Premier Li Qiang to avoid further escalation.
Still, investor sentiment is firmly risk-off. And as central banks begin reacting, the world’s largest economies may soon have to weigh a bigger concern: stagflation.
