Trump’s expanding tariffs shake global markets and deepen tensions with China

Department of Research, Studies and International News 09-04-2025

The international trade landscape was rattled this week as Donald Trump announced a sweeping expansion of tariffs affecting a wide range of countries, intensifying fears of a prolonged global economic slowdown and marking a significant escalation in U.S.–China trade hostilities.

Beginning Wednesday, the United States increased tariffs on imports from 57 countries, territories, and trading blocs. These new levies have raised the total tariff burden on Chinese goods to an unprecedented 104%, while other regions such as the European Union, India, and Cambodia are now subject to duties of 20%, 26%, and 49%, respectively.

Markets around the world responded with alarm. European indices plummeted in early trading, with the UK’s FTSE 100 down 2.2%, Germany’s DAX falling 2.3%, France’s CAC 40 losing 2.4%, and Spain’s IBEX declining by 2%. Asian markets also endured sharp losses: Japan’s Nikkei dropped nearly 4%, and Taiwan’s index plunged 5.8%. In contrast, Chinese markets showed relative resilience, buoyed by state-led interventions, Shanghai’s SSE rose 1.1%, and Shenzhen’s index gained 2.2%.

Despite the intensifying dispute, Beijing remained firm in its stance. Chinese officials reiterated their opposition to a trade war but vowed to defend national interests. In a white paper released Wednesday, the Chinese government criticized U.S. trade policies as aggressive and unjust, asserting that Washington’s actions would ultimately harm American interests. The document stated that rather than seeking fair competition, the U.S. was misusing trade mechanisms to suppress China and failing to honor previously signed agreements, such as the Phase One deal negotiated during Trump’s first term.

The economic fallout of the new measures was visible across multiple sectors. Oil prices, for instance, continued a downward trend, hitting their lowest point since early 2021 due to concerns that rising tariffs could suppress global demand and stall economic growth. Meanwhile, U.S. financial markets experienced sustained turbulence, with the S&P 500 index closing below the 5,000 mark for the first time in nearly a year after a fourth consecutive day of declines.

In response to the instability, several governments unveiled emergency measures to protect their economies. South Korea introduced a $2 billion aid package targeting its auto industry, which is likely to be heavily impacted by the new 25% tariffs on imported cars and light trucks. Taiwan activated emergency stabilization funds for its stock market, while New Zealand’s central bank reduced interest rates, citing trade-related uncertainty as a primary factor.

White House Press Secretary Karoline Leavitt defended the administration’s hardline approach, stating, “President Trump has a spine of steel and he will not break.” She emphasized that the president believes the tariff strategy will eventually lead to favorable trade agreements while encouraging manufacturers to bring operations back to the U.S.

However, economists and business leaders expressed skepticism about the effectiveness and long-term benefits of such policies. Many warn that rising import costs could stoke inflation, burdening consumers and making U.S. goods less competitive globally. While the administration argues that the tariffs will ultimately restore domestic manufacturing, experts caution that such shifts take time and may not yield the desired outcomes.

U.S. Treasury Secretary Scott Bessent described the tariffs as being at “maximum” levels and hinted that diplomatic negotiations might bring them down if other countries offer constructive proposals. “We expect some of the larger trade-deficit countries to approach us soon with solutions,” he said in an interview.

Trump himself offered a mixed message, stating that while some tariffs might be permanent, negotiations were still possible. He claimed the U.S. was generating close to $2 billion daily through the new levies and hinted at additional duties on pharmaceutical imports to encourage domestic drug production.

On the international front, talks have been scheduled with key allies, including South Korea and Japan. Italian Prime Minister Giorgia Meloni is also expected to visit Washington soon to discuss bilateral trade. Trump noted that more than 70 nations had expressed interest in discussions, but admitted logistical constraints in handling negotiations at that scale.

Meanwhile, the new tariffs dominated Chinese social media discussions. On Weibo, users mocked the U.S. for its domestic shortages and predicted price hikes for American tech products like iPhones. Some influencers suggested retaliatory measures, such as restricting the import of U.S. poultry and eggs, which would strike a blow to American agriculture.

Back in the UK, Chancellor Rachel Reeves attempted to reassure Parliament, reporting that markets remained functional and the banking system stable. She emphasized that Britain was pursuing a revised trade agreement with Washington to mitigate the impact of the new tariffs.

The European Union also sought to calm tensions, with Commission President Ursula von der Leyen warning against further escalation during a call with Chinese Premier Li Qiang. French President Emmanuel Macron urged the U.S. to reconsider its stance, though he conceded that the EU would respond if forced.

In the broader picture, this tariff surge marks a critical juncture in global trade dynamics. While Washington insists its approach is calculated and necessary, many warn that such aggressive protectionism risks sparking a protracted conflict with global economic consequences.