Trade War : China Responds with 125% Tariffs on U.S. Goods

China announced on Friday that it would increase tariffs on U.S. goods to 125%, up from the previous rate of 84%. The Chinese finance ministry characterized this move as a necessary response to U.S. President Donald Trump’s reciprocal tariffs.

The ministry stated, “Even if the U.S. continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of the world economy.” It further emphasized that, at the current tariff levels, there is effectively no market for U.S. imports in China, warning that any further U.S. tariff increases would be disregarded by Beijing.

The Trump administration confirmed that the total U.S. tariff rate on Chinese imports has now reached 145%. This increase includes a 125% tariff implemented through Trump’s latest executive order, alongside a 20% fentanyl-related tariff enacted earlier this year.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, remarked, “This marks the end of the escalation regarding bilateral tariff rates. Both China and the U.S. have signaled that further increases are unwarranted.” He noted the urgent need to assess the economic impacts of these tariffs on both nations, highlighting a lack of indications that either government is willing to engage in negotiations to prevent significant disruptions in global supply chains.

In contrast to previous retaliatory actions, Beijing has opted not to announce additional export controls or expand its “unreliable entity list,” which could further restrict American firms operating in China. Nonetheless, a spokesperson from China’s commerce ministry reiterated the country’s openness to negotiations with the U.S. on an equal basis.

The prospect of a trade agreement to alleviate tensions appears increasingly dim, as China has implemented retaliatory duties and extensive restrictions on U.S. businesses over the past week. U.S. Treasury Secretary Scott Bessent expressed concern over China’s reluctance to negotiate, labeling them as “the worst offenders in the international trading system,” and stated that this escalation would ultimately be detrimental to China.

In light of these developments, Goldman Sachs has revised its GDP growth forecast for China down to 4%, attributing this adjustment to the ongoing trade tensions and a slowdown in global growth. Although U.S. exports represent only about 3% of China’s total GDP, the impact on employment is substantial, with analysts estimating that between 10 million and 20 million Chinese workers are tied to export businesses destined for the U.S.

China reaffirmed its commitment to “resolutely counter-attack and fight to the end” against any U.S. actions that infringe upon its interests. During a meeting with Spanish Prime Minister Pedro Sánchez, Chinese President Xi Jinping emphasized that “there is no winner in a tariff war,” warning that isolating oneself from the global community would yield no benefits. The two leaders expressed intentions to strengthen collaboration in trade, investment, and technological innovation.