China increases levies on U.S. as Trump’s 104% tariffs take effect; stocks sink

Beijing hit back Wednesday against President Donald Trump’s tariffs by imposing an 84% levy on all U.S. goods, as the world’s second-largest economy signaled it would not back down, even as Chinese officials called for talks.

The retaliation came just hours after Trump’s “Liberation Day” tariffs on 86 countries took effect at 12:01 a.m. Eastern time on Wednesday, with successive increases raising U.S. duties on all imports from China to 104%.

“The U.S. move to escalate tariffs on China is a mistake upon a mistake,” the State Council, the equivalent of a cabinet, said in a statement announcing the new import duty.

Earlier, Foreign Ministry spokesman Lin Jian said China would “continue to take firm and forceful measures to safeguard its own interests.”

China’s move is the latest salvo in an escalating trade war that has raised fears of a global economic downturn. After Asian shares closed lower on Wednesday, stock markets across Europe continued to slide ahead of a European Union decision that approved retaliatory measures against U.S. steel tariffs.

The trade war is particularly fractious between the world’s two biggest economies, pushing U.S.-China tensions to a new level of confrontation that analysts say is becoming increasingly difficult to de-escalate.

With the new tariff, Beijing has more than doubled the original 34% duty that it announced Friday. All American goods destined for China will now be subject to tariffs of 84%, starting at noon Beijing time on Thursday.

But even as China, the world’s largest exporter, projects defiance, it has left the door open for negotiations.

In a white paper released earlier Wednesday, the State Council said differences should be resolved “through dialogue and consultation,” adding: “We hope that the United States and China will meet each other halfway.”

Analysts said China’s retaliatory measures – tariffs, as well as export controls and the addition of American companies to trade blacklists – can be reversed relatively easily.

“Beijing is demonstrating it can hit back hard – while still leaving room to pivot if negotiations progress,” said Lizzi C. Lee, an expert on China’s economy at the Asia Society Policy Institute’s Center for China Analysis.

Before the tariffs took effect, White House spokeswoman Karoline Leavitt suggested Tuesday that Trump was open to talking – as long as Beijing made the first move.

“The president also wanted me to tell all of you that if China reaches out to make a deal, he’ll be incredibly gracious, but he’s going to do what’s best for the American people,” Leavitt said at a news briefing. “China has to call first.”

European markets continued to slide Wednesday morning ahead of a vote by the European Union on its response to Trump’s tariffs on aluminum and steel. The bloc’s countermeasures are expected to target a range of U.S. imports, with tariffs up to 25%.

London’s FTSE 100, France’s benchmark CAC index, Germany’s DAX index and Europe’s broad-based STOXX 600 fell between 2.5% and 3.5% in early trading Wednesday.

Shares in drug makers suffered in particular, after Trump said he would announce a “major tariff on pharmaceuticals” while speaking Tuesday night at a Republican Party dinner in Washington. Companies such as AstraZeneca, GSK, Roche, Sanofi, Novartis and Danish pharmaceutical giant Novo Nordisk, producer of weight loss drugs Ozempic and Wegovy, saw their share prices shed between 5% and 7% in European markets early Wednesday.

In Asia, Japan’s benchmark Nikkei 225 closed almost 4% lower, while Australia’s ASX 200 index and South Korea’s KOSPI both ended the day almost 2% lower.

Hong Kong’s Hang Seng Index, on which many Chinese exporters are listed, fell by almost 4% hen trading opened Wednesday, although it ended the day in positive territory.

Confounding analysts, yields on the 10-year U.S. Treasury bond – widely considered the ultimate safe haven for investors – rose sharply during Asian trading hours, sending prices falling.

“This is a highly unusual situation,” said David Scutt, Asia Pacific market analyst for StoneX, a financial services firm. “It’s incredibly rare to see moves of this magnitude in benchmark 10-year Treasury yields especially in the Asian time zone.”

Analysts said Wednesday’s market moves reflected broad concern about the impact the tariffs would have on the U.S. economy.

“Many people say that by the time the Trump administration realizes how bad this is, it will be too late and the U.S. will be in a recession,” said Alicia García Herrero, chief economist for Asia Pacific at the investment bank Natixis. “So if they want to do something about this they better do it now.”

Other countries are trying hard to broker deals with the Trump administration to avert tariffs. Treasury Secretary Scott Bessent told CNBC that nearly 70 countries have approached the United States about negotiating over trade barriers.

Argentina, Vietnam and Israel have indicated they will drop their tariff and regulatory barriers to U.S. exports, while South Korea and Japan are now actively pursuing negotiations.

Trump said on social media Tuesday he had a “great call” with South Korea’s acting president about a potential deal to remove the 25% tariff Trump threatened to impose on the ally’s exports.

Beijing has hit back

But most of the focus was on China, the world’s biggest exporter and the recipient of the biggest tariffs.

Trump on Tuesday tripled the tariff rate he had announced on low-value packages from China, closing a loophole that allowed Chinese companies like Shein and Temu to sidestep duties on shipments worth less than $800. From June 1, those packages will face a tax of 90% of their value, up from the originally planned 30% duty.

While other countries have approached the White House to negotiate over the trade measures, Beijing has matched Trump step for step, retaliating with its own tariffs and expanding its kit of retaliatory tools.

Analysts say that further retaliation could involve suspending cooperation to stop fentanyl and related chemicals from reaching the United States; stopping imports of U.S. products that depend on the Chinese market like farm products; or cutting off U.S. access to critical minerals needed for high tech equipment.

But the longer the trade fight goes on, the more Beijing sees U.S. moves as simply an effort to contain China.

“Beyond a certain point, further escalation loses meaning,” said Lee from the Asia Society Policy Institute’s Center for China Analysis. “China would likely decide there’s no point in continuing to engage – and at that stage, retaliation could take forms the U.S. isn’t ready for.”

Chinese state media on Wednesday was awash with commentary saying China could not back down.

“The weaker you are, the happier the United States is and the harder it will hit you,” said an article on Niu Tanqin, an influential blog run by a former journalist with the state news agency, Xinhua.

The steep tariffs on Chinese goods will almost certainly raise prices for American consumers on products including clothes, shoes and electronics – something Chinese state media have pointed out.

“Manufacturers here cannot absorb the burden,” Liang Mei, president of the China Toy and Juvenile Products Association, was quoted as telling the state-affiliated Global Times newspaper Tuesday. U.S. retailers would shoulder part of the cost and the rest “will be passed on to American consumers,” Liang said.

Independent experts agreed.

Naomi Fink, chief global strategist at Nikko Asset Management in Tokyo, said the new tariffs will “first and foremost be a blow to U.S. consumers,” which will ultimately affect exporters to the U.S. But the ultimate impact on domestic U.S. interests is significant, and countries on the receiving end of tariffs recognize that, she said.

“The thing here, and I think China even stated it, is that the only reason they’re retaliating is because they know it’s a credible threat to the U.S. consumer, who’s also the U.S. voter, and they know the U.S. consumer is wearing the cost,” Fink said.

Here’s how the tariff on Chinese goods got to 104%:

• With a Feb. 1 executive order, Trump imposed a 10% tariff on Chinese goods, saying it was punishment for Beijing’s lack of progress in stopping the flow of fentanyl and precursor chemicals to the United States.

• Beijing responded with a 15% levy on imports of U.S. coal and liquefied natural gas, as well as a 10% tariff on agricultural equipment and crude oil.

• At the end of February, Trump announced an additional 10% tax on Chinese goods, again citing the opioid epidemic. Beijing, which insists that this is a U.S. public health issue, imposed a 15% duty on imports of American farm products including chicken, pork and soy – a move designed to inflict pain in Trump-supporting agricultural states.

• In his “Liberation Day” tariff blitz, Trump imposed a further 34% tariff on all Chinese goods, to come into effect April 9, taking the blanket tariff to 54%.

• China responded two days later by levying a 34% blanket tariff on all products from the United States and condemned the Trump administration’s “unilateral bullying.” It also further restricted exports of rare earth minerals, blacklisted a slew of American companies and filed a lawsuit with the World Trade Organization.

• Trump said Monday that if Beijing did not promptly withdraw the blanket measure, he would increase the duty on all Chinese goods by a further 50 points, taking the minimum tariff to 104%.

Craw reported from London. Vic Chiang in Taipei, Lyric Li in Seoul, Michelle Ye Hee Lee in Nagoya, Japan, and Christian Shepherd in Singapore contributed to this report.