Escalating U.S.-China trade war rattles global markets

China retaliates with increased tariffs

In response to the United States raising tariffs on Chinese imports to 104%, China announced an increase in its retaliatory tariffs on U.S. goods from 34% to 84%, effective April 10, 2025. The Chinese Ministry of Commerce stated that this move is a countermeasure to the U.S.'s unilateral tariff escalation and emphasized China's readiness to "fight to the end" unless the U.S. engages in equal and respectful negotiations. ​

Global markets react negatively

The escalation in trade tensions has led to significant declines in global stock markets. U.S. stock futures indicated substantial losses, with Dow Jones futures down 2.2%, S&P 500 futures off 2.1%, and Nasdaq 100 futures dropping 1.9%. European and Asian markets also experienced sharp declines, reflecting investor concerns over the potential impact of the trade war on global economic growth. ​

Amid the market turmoil, investors have turned to safe-haven assets. Gold prices have surged as demand increased.

Economic outlook and recession fears

Economists are expressing concerns about the potential for a global recession if the trade war continues to escalate. The increased tariffs are expected to raise consumer prices, disrupt supply chains, and dampen business investment, all of which could contribute to an economic slowdown. The U.S. Treasury Secretary labeled China's tariff escalation as "unfortunate" and warned that it could be detrimental to Beijing's economy. ​

International responses and diplomatic efforts

The international community has expressed concern over the escalating trade conflict. China has filed a new complaint against the U.S. at the World Trade Organization and imposed additional restrictions on American companies, including placing 11 firms on its "unreliable entities" list, which restricts them from accessing Chinese dual-use goods. ​

As the situation develops, market participants and policymakers are closely monitoring the potential for further escalations and their implications for global economic stability.​

FOMC minutes today

The Fed releases the minutes of the March FOMC meeting later. It’s old news essentially but expect a lot of references to 'uncertainty' to reflect the tone of the of Chair Powell’s post-meeting press conference and caution on the outlook, echoing last Friday’s remarks. A May rate cut is a 50/50 bet, according to swaps—but perhaps only because investors hope the 'Fed put' strike is nearing. It isn’t.