Tariffs reside: China raises levies to 125% on US as Trump commerce battle escalates

The European Union’s economic commissioner warned the bloc would ‘defend our economy’ if the US decides to bring higher tariffs back.

EU Commissioner for Economy and Productivity Valdis Dombrovskis spoke in Warsaw ahead of a meeting of European economic and financial affairs ministers and central bank governors.

“Obviously, the most urgent topic we are going to discuss is the questions related to the Trump tariffs and its macroeconomic implications, and also the EU’s response,” he said.

“If we do not see movement also from US side and willingness to move away from this kind of tariff policy, we will have to defend our economy.”

Mr Dombrovskis said the global economic outlook was becoming more unpredictable, and the remaining tariffs would harm the global economy.

“It’s also worth noting that the situation remains very uncertain and volatile. Just a few days ago, 20 per cent tariffs were announced against the EU, now for 90 days, it’s announced it’s only going to be 10 per cent tariffs,” he said.

“We should not forget that the 10 per cent reciprocal tariffs remain in place for almost all countries and they represent a blow to the global economy.”

Business and Money Editor Karl Matchett is watching trading markets today:

If any further indications were required about how nobody has a clue over the current outlook, today’s trading in the stock market should do the trick.

The FTSE 100 has been up 2 per cent, as low as 1 per cent in the red – and now around midday it is back up almost a full per cent again.

There has of course been more to digest today over China raising tariffs and calling on the EU for support, while we’re also still awaiting tariffs from the US themselves over pharmaceuticals.

Given several big hitters operate from the UK, including the FTSE’s biggest company AstraZeneca, that will doubtless have another sizeable impact when it arrives.

Right now though, the markets in France are flat for the day, in Germany are still down 0.4 per cent and for the S&P 500 futures are up 0.7 per cent. If you’re managing to keep track of all the swings, well done.

If not…well, this is why experts agree that for retail investors, the best approach is to not make snap judgements about your holdings, or try to time the market.

China’s foreign ministry spokesperson Lin Jian says further US increases to tariffs on Chinese goods will be ignored.

“Given that US exports to China are already commercially unviable at current tariff levels, any further US tariff hikes on Chinese goods will simply be ignored,” he said.

From tomorrow, tariffs on US exports to China will be lifted to 125 per cent, in retaliation for the Trump administration hiking its tariffs on Chinese goods to 145 per cent in an escalating trade war.

Donald Trump’s aggressive tariffs on imports could have a “catastrophic” effect on developing countries, the director of the United Nations trade agency said.

Some of the toughest tariff increases announced by the US President last week were on developing countries, including 49 per cent for Cambodia, 44 per cent for Sri Lanka and 37 per cent on Bangladesh.

The International Trade Centre said global trade could shrink by 3-7 per cent and global gross domestic product by 0.7 per cent, and it would hit developing countries the hardest.

“It is huge,” the centre’s executive director Pamela Coke-Hamilton told Reuters. “If this escalation between China and the US continues it will result in an 80 per cent reduction in trade between the countries, and the ripple effect of that across the board can be catastrophic.”

Chinese Foreign Minister Wang Yi said that on tariffs: “the U.S. cannot act recklessly, and the wheel of history cannot go backwards.”

He made the comments in a Beijing meeting with the International Atomic Energy Agency’s Director General Rafael Mariano Grossi on Friday.

Mr Wang’s comments caome after China increased its tariffs on US imports to 125 per cent, in retaliation for Donald Trump raising levies on Chinese imports to 145 per cent.

Economic experts say the escalating tariff war between China and the US could cause widespread damage.

Dan Coatsworth, investment analyst at AJ Bell, told The Independent before China raised tariffs even further on Friday that the trade relationship was “in tatters”.

“It is now significantly more expensive for a US company to buy goods from China, and for Chinese companies to buy from the US,” he said. ‘The end customer will ultimately bear the extra cost and they could vote with their feet by buying less or not at all.”

Dr Robert Basedow, Assistant Professor at the London School of Economics, said the “immediate collateral” was that Chinese goods destined for the US would now be dumped in other markets.

“This will put pressure on European and other Asian producers and fuel demands for anti-dumping and countervailing duties around the world,” he said.

Independent economist Chris Richardson said while some economies could see some benefits – cheaper Chinese cars in countries that don’t manufacture vehicles, for example – the fight would have broad negative effects.

“The US is doing stupid things, China is doing stupid things, and a lot of people will suffer as a result,” he said.

The EU’s trade chief will travel to Washington on Sunday, following Donald Trump’s decision to pause increased tariffs for 90 days.

EU Commission President Ursula von der Leyen earlier announced the bloc would also hit pause on its countermeasures in response to the White House pause.

“We want to give negotiations a chance,” she said on social media on Thursday, but added “all options’” were on the table.

“If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues.”

We’re still seeing a mid-morning turnaround in the markets after that fairly strong start – both the CAC 40 and DAX are in the red to the tune of more than 1.5 per cent, while the FTSE 100 is only 0.5pc or so down.

We’re perhaps seeing that mirror the futures market for the S&P 500 which at this stage, several hours ahead of the markets opening Stateside, is down 0.4pc having been showing as high as 5375 a couple of hours ago.

The S&P closed at 5268 yesterday after a 3.5pc drop. We’re all seeing this uncertainty still leave investors wondering where to turn – except in gold, which is again at a record high.

The European Commission’s 90-day pause on its first countermeasures against President Donald Trump’s tariffs was “the appropriate decision” that allows for a negotiated solution, Spanish Economy Minister Carlos Cuerpo said on Friday.

“Delaying countermeasures is in line with our call to reach a negotiated solution to the trade row. The door is open and we ready to walk through it. There is a lot to protect in the EU-U.S. relationship, but it has to be a fair and balanced deal,” he wrote on social media platform X.

Sir Keir Starmer must call a summit of world leaders to deal with the impact of Donald Trump’s tariffs, in the same way he rallied world leaders to support Ukraine, the Liberal Democrats have said.

Lib Dem leader Sir Ed Davey said: “Donald Trump’s nonsensical economic policies have thrown the world economy into crisis and put thousands of British jobs at risk. Now is not the time for complacency.

“The Prime Minister should show the White House that we have alternatives by hosting a summit of world leaders and building an economic coalition of the willing.

“Both Kemi Badenoch and Nigel Farage want the UK to go cap in hand to Trump and beg him for a trade deal. That is not the way to stand up for Britain or our national interest.

“We need to show a united front and put pressure on the US to not just make this 90-day pause permanent, but remove their remaining tariffs on British businesses and our car industry completely.

“The best way to end this trade war for good is by standing tall with our allies, not cowering in the corner.”