China raises tariffs on American goods to 125% as trade war with US heats up

Following Donald Trump's tariff hike, China has increased tariffs on US goods from 84% to 125%, escalating the trade tensions between the two countries, reported Bloomberg citing China's Finance Ministry.

The announcement comes after the White House clarified that the duties imposed on Chinese goods rose to 145% this year.

“Given that there is no longer any possibility of market acceptance for US goods exported to China under the current tariff levels, if the US side subsequently continues to impose tariffs on Chinese goods exported to the US, the Chinese side will pay no attention to it,” the Finance Ministry said.

China also claimed that the Trump administration's repeated tariff hikes make no economic sense and have become a tool for bullying and coercion. “It’s become a joke,” the ministry said.

How did markets react?

S&P 500 futures dropped after China’s tariff hike announcement, while futures on the Hang Seng China Enterprises Index rose. The dollar dropped, pushing Bloomberg’s index of the US currency to a more than 1% decline on the day, the report said.

Will China engage in a trade war?

Earlier, Chinese Foreign Ministry Spokesperson Lin Jia said that Beijing does not intend to engage in a trade war but will respond if tariff hike escalate to a point, according to Chinese news portal Xinhua.

"A just cause enjoys the support of many," Lin said, stating that the US actions will fail.

"We will never sit idly by and watch while the legitimate rights and interests of the Chinese people are infringed, nor will we sit idly by as international economic and trade rules and the multilateral trading system are undermined," the spokesperson said.

Donald Trump's announcement on Wednesday

China's action follows US President Trump's announcement that the US had hiked China tariffs to a whopping 125% while declaring a 90-day pause on duties for other trading partners.

‘No other president would have done what I did. Somebody had to do it.’ Trump told reporters on Wednesday.

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A." Donald Trump wrote on his Truth Social post.

Why did Trump impose tariffs on China?

Trump's announcement on Wednesday comes after China retaliated with 34% additional tariffs on the US after Trump announced reciprocal tariffs on April 2.

125% or 145% tariffs on China?

The White House clarified on Thursday that the total tariffs on Chinese goods now stand at 145%. The 125% tariff announced by Trump will be added to the existing 20% duties on goods coming from China, reported CNN.