In a stark escalation of the trade war between the United States and China, Beijing announced on Friday that it will raise tariffs on American imports to 125%, effective Saturday.
The move comes in response to Washington’s recent decision to impose a total of 145% in tariffs on Chinese goods—combining a new 125% hike with an earlier 20% levy introduced under fentanyl-related sanctions.
The Chinese Ministry of Finance delivered the announcement with pointed rhetoric, branding President Donald Trump’s trade policies as “a joke” and signaling that it would not further match additional U.S. tariff increases. “Even if the U.S. continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of world economy,” the ministry declared.
The Chinese Finance Ministry stated that tariffs would not be increased further, citing “no possibility of market acceptance for U.S. goods exported to China”, meaning that U.S. goods are no longer viable for the Chinese market at the current rates.
China’s firm stance
Friday’s statement marks Beijing’s third retaliatory move in response to successive rounds of U.S. tariff hikes since President Trump began his second term. Notably, Chinese officials emphasized that American goods are now economically unviable in their market, with Beijing warning that it would “disregard” any further U.S. tariff increases. However, it maintained that if Washington “continues to substantially infringe on China’s interests,” it would “resolutely counterattack and fight to the end.”
While many global observers had hoped for some measure of restraint, President Xi Jinping, in a rare public comment on the issue, made clear China’s disapproval. Speaking during a meeting with Spanish Prime Minister Pedro Sánchez, Xi stated, “There are no winners in a tariff war and going against the world will only result in self-isolation.”
Economic fallout and market reaction
The immediate market response was turbulent. The three main European stock indices slipped after initial gains, reflecting growing concern over the trajectory of U.S.–China relations. Adam Hetts, global head of multi-asset at Janus Henderson, warned, “Recession risk is much, much higher now than it was a couple weeks ago.”
Adding to the pressure, China also filed a formal complaint with the World Trade Organization (WTO), accusing the U.S. of violating international trade rules and undermining the global economic order that it once helped build.
Strategic implications and supply chain strain
The growing rift has already had a chilling effect on global trade. American and Chinese businesses, once tightly interlinked, are now reassessing supply chains and cancelling contracts amid rising uncertainty. The U.S. exports targeted by China’s new tariff include agricultural staples like soybeans, electronics, machinery, and aircraft—sectors critical to American industry. In 2024 alone, U.S. exports to China were valued at $143.5 billion, while imports from China totaled $440 billion.
The technology sector, in particular, is bracing for impact. Mark Moccia, VP and research director at Forrester, warned that PC prices could spike by up to 68%, and that companies may delay major IT investments. “CIOs and other tech leaders will need to proactively analyze costs, diversify sourcing, optimize inventory, and prioritize the projects that don’t sacrifice critical AI ambitions,” he said.
Bigger Picture: A Numbers Game with Global Consequences
Despite the aggressive tit-for-tat measures, both sides have offered clues that a threshold may have been reached. Chinese economists noted that with tariffs now matching, any further escalation could become purely symbolic. Zhiwei Zhang, chief economist at Pinpoint Asset Management, suggested, “This is the end of the escalation in terms of bilateral tariff rates.”
Nevertheless, the lack of a clear diplomatic path forward is unsettling markets and policymakers alike. While the Trump administration this week suspended reciprocal tariffs on dozens of other nations for 90 days, the hardline stance toward China remains intact.
Secretary of the Treasury Scott Bessent commented on the situation, saying, “They [China] have the most imbalanced economy in the history of the modern world, and I can tell you that this escalation is a loser for them.”
China’s rebuttal was swift and biting. A spokesperson from the Commerce Ministry reiterated: “The U.S.’s repeated imposition of abnormally high tariffs on China has become a numbers game, which has no practical economic significance.”