Former President Donald Trump recently declared a massive escalation of his trade war with China, more than tripling tariffs on Chinese imports to 125%. This decision is part of an attempt to curb what Iger has called China’s “unfair trade practices.” The announcement comes amid rising tensions in international trade, with over 75 countries reportedly reaching out to U.S. officials to express their concerns regarding trade issues.
As for the Trump administration, earlier this month, Trump himself announced that talks have taken place. People from the Departments of Commerce, Treasury and Office of the U.S. Trade Representative were engaged. These discussions are part of a rising tide of concern from America’s global trading partners, reflecting fears over the meaning and consequences of U.S.-China relations. To allow for further negotiations, Trump has approved a 90-day pause on additional trade actions while simultaneously authorizing a temporary reduction in reciprocal tariffs to 10%, effective immediately.
In the process Trump taps into the very real anxiety that China has gamed the international trade system for too long. His recent 10th tariff increase is his big card to play to force changes in Beijing. He explained that this decision was based on China’s continued aggression against international markets. He sounded deeply encouraging. For these reasons, he believes that despite Xi’s current bravado, China will soon come to understand that its practices of fleecing the United States and other countries are not acceptable or sustainable.
The economic implications of this 25% tariff hike are being felt now. In retaliation to the U.S. tariffs, China too has increased extra tariffs on imports from the U.S. to 125% (originally 84%). The growing trade war is causing more jitters on the market and is exacerbating the effects of a declining U.S. dollar. Yet this issue still largely rules the roost. The EUR/USD currency pair has responded positively to these changes, trading at its highest level since February 2022, above 1.1400.
Gold prices have skyrocketed in the wake of these tensions. They continued their rally, hitting an all-time-high of over $3,220 during the European trading day on Friday. Such increases in gold prices are an indication of investor fear over the stability of global markets during an escalating trade war.
As proof of success, Trump pointed to the fact that no country has retaliated against the United States yet. This claim highlights his administration’s effort to hold a hard line in negotiations, while still trying to appear to be dealing with long-standing, Trump-initiated trade concerns.