The global trade war, sparked by U.S. President Donald Trump’s sweeping tariffs, took a dramatic turn on Monday as Trump threatened to raise duties on China, while the European Union proposed counter-tariffs in retaliation. This intensifying trade conflict sent shockwaves through financial markets, which posted a third consecutive day of losses, with concerns growing that escalating trade barriers could lead to a global recession.
The S&P 500 ended the day lower after a volatile session, briefly touching its lowest point in over a year. Investors are increasingly anxious about the long-term impact of the U.S.-initiated tariffs on global trade and economic growth.
Trump justified his tariff policy, which includes a minimum of 10% on all U.S. imports and targeted rates as high as 50%, as a necessary step to revitalize the American industrial base. “It’s the only chance our country will have to reset the table,” Trump said during a White House briefing. “No other president would be willing to do what I’m doing, or to even go through it. I see a beautiful picture at the end.”
This came hours after Trump intensified his confrontation with China, announcing that he would impose a 50% tariff on U.S. imports from China unless Beijing removed the 34% tariffs it had levied on American goods. These Chinese tariffs were a retaliatory measure to Trump’s previous imposition of 34% duties on Chinese imports.
In response, China’s embassy condemned the U.S. move, calling it “unilateralism, protectionism, and economic bullying.” Spokesperson Liu Pengyu stated, “We have stressed more than once that pressuring or threatening China is not the right way to engage with us. China will firmly safeguard its legitimate rights and interests.”
Meanwhile, the European Commission proposed counter-tariffs of 25% on a range of U.S. goods, including soybeans, nuts, and sausages. Other potential items like bourbon whiskey were left off the list. EU officials have expressed a willingness to negotiate a “zero for zero” deal with the U.S. to resolve the issue. “Sooner or later, we will sit at the negotiation table with the U.S. and find a mutually acceptable compromise,” said EU Trade Commissioner Maros Sefcovic.
The EU, already grappling with tariffs on autos and metals, also faces a 20% tariff on other products starting Wednesday, and Trump has threatened additional tariffs on European alcoholic drinks.
U.S. Treasury Secretary Scott Bessent recently met with Trump in Florida to urge a focus on striking trade deals with key allies to reassure markets that a resolution to the trade dispute is on the horizon. Trump has also indicated that trade talks with Japan and other countries will begin soon to prevent the implementation of additional tariffs.
As tensions rise, the global economic outlook remains uncertain, with markets awaiting any sign of a breakthrough or further escalation.
