BEIJING/WASHINGTON/LONDON, April 12 — Beijing increased its tariffs on United States (US) imports to 125 per cent on Friday, hitting back against President Donald Trump's decision to raise duties on Chinese goods and upping the stakes in a trade war that threatens to upend global supply chains.
The retaliation intensified the global economic turmoil unleashed by Trump's tariffs. US stocks ended a volatile week higher, but the safe haven of gold hit a record high during the session.
Benchmark US 10-year government bond yields posted their biggest weekly increase since 2001 alongside a slump in the dollar, signaling a lack of confidence in America Inc.
One US survey of consumers showed that inflation fears have mounted to their highest since 1981, while financial institutions have been forecasting an ever greater risk of recession.
Trump downplayed the market turbulence, predicting the dollar would strengthen and saying many tariffs could settle in around 10 per cent once the US cut trade deals with all the countries that want to negotiate.
"When people understand what we are doing, I think the dollar will go way up. The bond market is going good.
"It had a little moment, but I solved that problem very quickly," he told the press aboard Air Force One late on Friday.
The White House has said that more than 75 countries have sought negotiations and that future deals would bring certainty.
India and Japan are among the powers that have advanced toward trade talks, but foreign leaders have generally puzzled over how to respond to the biggest disruption to the world trade order in decades.
Analysts say the US and China's tariff increases will make goods trade between the world's two largest economies impossible. That commerce was worth more than US$650 billion (RM2.87 trillion) in 2024.
"The president made it very clear: When the United States is punched, he will punch back harder," White House Press Secretary Karoline Leavitt told the press on Friday.
The dollar slid, and a sell-off intensified in US Treasuries, the world's biggest bond market, as gold climbed.
With the dollar weakening, the selling of US assets was perhaps most exemplified by this.
The price decline in the US 10-year Treasury note drove its yield — which moves opposite to the price and is critical for determining interest rates on mortgages — to a two-month high. During the week, its yield climbed nearly half a percentage point.
Treasury Secretary Scott Bessent is closely monitoring the bond market, Leavitt said.
A second day of data on US inflation showed price pressures were not yet building broadly across the US economy, although the Producer Price Index for March did show industrial metals prices rising due to import levies on things like steel and aluminum, in place for a month now.
"Tarifflation will be much more important for the outlook than backward-looking data. If tariffs stay in place, they will push inflation considerably higher in coming months," said Comerica Bank chief economist Bill Adams.
The University of Michigan's Consumer Sentiment Index dropped to 50.8 this month from 57.0 in March. Economists polled by Reuters had forecast the index falling to 54.5.
In a reversal of previous surveys, the latest one also showed weakening confidence among Trump's fellow Republicans.
Consumers' 12-month inflation expectations soared to 6.7 per cent this month, the highest since 1981, from five per cent in March, according to the survey.
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New vehicles are seen at a parking lot in the Port of Richmond, as trade tensions escalate over United States (US) tariffs with China, at the bay of San Francisco, California, the US, on April 11, 2025. — Picture by REUTERS[/caption]
Trade war with China
This week, Trump announced a 90-day tariff pause on dozens of countries while ratcheting up tariffs on Chinese imports effectively to 145 per cent.
China retaliated with more tariffs on Friday. China's Finance Ministry called Trump's tariffs "completely unilateral bullying and coercion."
Beijing indicated this would be the last time it matched US tariff rises but left the door open for other types of retaliation.
"If the US truly wants to have talks, it should stop its capricious and destructive behavior. China will never bow to maximum pressure of the US," said the Chinese Embassy in the US' spokesperson Liu Pengyu.
In a note, UBS analysts called China's declaration "an acknowledgement that trade between the two countries has essentially been completely severed."
In turn, Leavitt warned Beijing: "If China continues to retaliate, it is not good for China."
On Thursday, Trump told the press that he thought the US could make a deal with China and that he respected Chinese President Xi Jinping.
On Friday, Xi made his first public remarks on Trump's tariffs, telling Spanish Prime Minister Pedro Sanchez in Beijing that China and the European Union should "jointly oppose unilateral acts of bullying."
— Reuters
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China Shipping containers are seen at the port of Oakland, as trade tensions escalate over the United States (US) tariffs with China, in Oakland, California, the US, on April 10, 2025. — Picture by REUTERS[/caption]
