Growing trade tensions as US imposes tariffs, risking retaliation from China and EU

From Investing.com: 2025-04-08 02:04:00

President Trump declared a national emergency over trade deficits, imposing a 10% general tariff on all countries effective 5 April, with higher tariffs on nations with large US trade deficits starting 9 April. This signals a shift to long-term policy, increasing the risk of retaliatory measures from Europe and China, escalating trade tensions. The lack of clear criteria for lifting tariffs adds uncertainty, disrupting global trade and financial markets.

The average US tariff on $3 trillion in imported goods is set to rise to 22%, the highest in a century, with various scenarios unfolding. China may negotiate or counter with stimulus and a weaker yuan, while the EU could prompt a US escalation, leading to market volatility.

China’s average tariff rate could jump by 54 percentage points this year alone, exceeding increases seen during Trump’s first term. The question now is how China will respond, with a potential devaluation triggering global market sentiment shifts.

The Atlanta FedGDPNow model estimates a contraction in Q1 US real GDP growth, projecting -3.7% growth as of 1 April, a dramatic reversal from the previous forecast of +3.8%. This real-time estimate reflects a significant change in expectations for the quarter.



Read more at Investing.com: Retaliatory Moves from China and EU Set the Stage for Prolonged Economic Tensions