Trade war with China escalates amid new tarrifs
China announced Friday that it will raise tariffs on U.S. goods from 84% to 125% — the latest salvo in an escalating trade war between the world’s two largest economies that has rattled markets and raised fears of a global slowdown. While U.S. President Donald Trump paused import taxes this week for other countries, he raised tariffs on China and they now total 145%. China has denounced the policy as “economic bullying” and promised countermeasures. The new tariffs began Saturday. LiveNOW from FOX host Stephanie Coueignoux spoke to Sandra Swirski, economy expert on the latest.
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WASHINGTON – China’s economy started 2025 with strong momentum, reporting a 5.4% annual growth rate for the first quarter, according to data released Wednesday. The boost came largely from a surge in exports, as companies rushed shipments ahead of sweeping new US tariffs.
But the gains may be short-lived. Economists are warning that growth will likely taper off in the coming months, as President Donald Trump’s 145% tariffs on Chinese goods begin to bite.
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Exports drive early-year boost
Big picture view:
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Exports surged more than 12% in March alone and nearly 6% overall in Q1, according to the Chinese government. That momentum helped push the quarterly growth rate to 1.2% and offered a temporary cushion for China’s manufacturing sector.
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“Much of this was front-loaded — fueled by a burst of preemptive activity ahead of U.S. tariff escalations and an inventory binge stateside as importers scrambled to get ahead of the curve,” Stephen Innes of SPI Asset Management said in a commentary, the Associated Press reported.
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Still, Beijing continues to face economic headwinds—from a sluggish post-COVID recovery to a prolonged property market downturn. Now, the trade war with the US is adding pressure just as China ramps up efforts to boost domestic consumption and private investment.
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Trump’s tariffs escalate trade tension
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The backstory:
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After initially announcing a 10% hike on Chinese imports, Trump raised tariffs to 20%, and now up to 145% on most Chinese exports. In retaliation, Beijing imposed 125% tariffs on American goods. Economists say the full impact of these measures could take a serious toll on trade.
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In this photo taken on December 7, 2023, the sun sets behind cranes at the container terminal at Nanjing port, in China’s eastern Jiangsu province. (Photo by STR/AFP via Getty Images)
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UBS analysts estimate China’s exports to the US could drop by two-thirds, with global exports falling 10% in dollar terms. As a result, the bank has lowered its 2025 growth forecast for China to 3.4%, down from 4%, and predicts a further drop to 3% in 2026.
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“Given the events over the past two weeks, it is extremely difficult to predict how the U.S. and China tariffs on each other might evolve,” Tao Wang and other UBS economists said in a report.
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Beijing’s response: Stimulus and subsidies
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What’s next:
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To counteract the slowdown, China has rolled out new stimulus efforts in recent months. These include subsidies for vehicle and appliance trade-ins, as well as funding support for housing and other struggling sectors.
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Despite concerns, both the International Monetary Fund and Asian Development Bank remain cautiously optimistic, projecting China’s 2025 growth around 4.6%.
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But with the trade outlook uncertain and consumer confidence still shaky, Beijing faces a tough road ahead in sustaining its recovery.
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The Source: This story is based on reporting from the Associated Press with economic data from Chinese government sources and analysis from UBS, the IMF, and the Asian Development Bank. This story was reported from Los Angeles.