China announced retaliatory tariffs of 84% on imports of US goods on Wednesday, matching additional tariffs imposed by US President Donald Trump earlier in the day and further inflaming the trade war between the world's two largest economies.

Trump's sweeping "reciprocal" tariffs took effect on Wednesday. China is the hardest hit, with levies now totaling at least 104% on all its goods. The two countries have been engaged in a tit-for-tat trade war, with Beijing fiercely opposing any new tariffs imposed by Washington.

The trade war escalated on Wednesday after the European Union announced it would begin levying retaliatory duties on US imports starting Tuesday.

Announcing China's response, the State Council Tariff Commission said in a statement: "The US tariff escalation against China is one mistake after another, seriously infringing on China's legitimate rights and interests, and seriously undermining the rules-based multilateral trading system." The tougher retaliation came after China repeatedly warned that it would "fight to the end" if the US continued to impose further tariffs.

On Wednesday, Trump's additional levies on Chinese imports were initially set to increase by 34 percentage points. However, the president raised them by another 50 percentage points after Beijing refused to back down from the standoff. Prior to the latest round of escalation, Trump had already imposed 20% levies on China.

The exchange of blows between the economic superpowers has caused a shift in stock markets globally, with Asian and European markets mostly down and US stocks opening mixed.

"This has become so ridiculous that it's hard to believe this is actually happening between the two largest economies that generate nearly $50 trillion of global GDP, nearly half the world – let alone a tariff war against the rest of the world," wrote Peter Boockvar, chief investment officer of Bleakley Financial Group, in a research note.

In addition to increased tariffs, China's Ministry of Commerce imposed export controls on 12 American companies, prohibiting Chinese firms from supplying them with dual-use goods that have both military and civilian applications.

They also added six more US companies to the “unreliable entity list,” barred them from trading or making new investments in China, and filed a complaint with the World Trade Organization over the latest US tariffs.

US Treasury Secretary Scott Bessent dismissed China's retaliation, telling Fox Business on Wednesday that it was unfortunate that China didn't "want to come and negotiate" a tariff deal. He called China "the worst abuser of the international trading system."

"They have the most unbalanced economy in modern world history, and I can tell you that this escalation is hurting them... They are a surplus country," Bessent said. "China's exports to the US are five times what we export to China. So, they can raise their tariffs. But so what?"

The EU's announcement on Wednesday was in response to a sharp increase in US tariffs on all steel and aluminum imports, announced last month.

"These countermeasures can be suspended at any time, if the US agrees to a fair and balanced outcome of the negotiations," the European Commission said.

Prepare for the impact

As Trump's tariff war escalates, messaging from the Chinese government, state media, and opinion leaders has been equally defiant, voicing their determination to retaliate while leaving open the possibility of negotiations.

Shortly after the latest round began on Wednesday, a Chinese Foreign Ministry spokesperson told reporters that the US needs to "show an attitude of equality, mutual respect and mutual benefit" if it truly wants to resolve the trade war through dialogue.

China also released a white paper on its trade and economic relations with the US, saying relations had been damaged by "unilateral and protectionist measures" taken by Washington.

In a written Q&A about the white paper, an unnamed Commerce Ministry official stressed that China does not want a trade war, but said Beijing will "never stand idly by" while the Chinese people's legitimate rights and interests are "harmed or deprived."

Despite its defiant tone and measured confidence, China is bracing for a potential impact on its export sector, which has been a bright spot in its slowing economy. Last year, trade between the US and China totaled about half a trillion dollars.

"If the US insists on further escalating trade restrictions, China has the strong will and ample tools to take decisive countermeasures—and will do so to the end," the official said.

The successive rounds of tariffs come as China enjoys a sense of greater economic vitality after years of grappling with a property crisis, high local government debt and the impact of Beijing's pandemic control.

Last month, the Chinese government announced a series of measures to boost domestic consumption as it anticipates the impact of Trump's trade policies on export-led growth.

Source: CNN

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