Trade War: US and China Exchange Retaliatory Tariff Blows

The trade war between the United States and China has taken a sharp turn. 

Washington’s 104% tariff on Chinese imports took effect this morning, prompting a swift and pointed response from Beijing, which imposed an 84% levy on US goods.

The escalation has revived fears of global economic fallout, with experts warning of growing risks to supply chains, financial stability and economic growth. 

With tariffs now at record levels, businesses and consumers on both sides of the Pacific are bracing for what could be a long and turbulent conflict.

The US-China trade conflict actually began under President Trump’s first term, when he cited unfair trade practices and theft of intellectual property. He has since introduced tariffs intended to penalise Beijing and protect American industries, sparking a retaliatory cycle, with both nations trading economic blows in the form of escalating duties.

Each round of tariffs has targeted a broad swathe of imports, from electronics and agricultural goods to industrial equipment. Both countries have taken a mirror approach, with one move swiftly answered by the other.

Industries such as agriculture, manufacturing and technology have borne the brunt of the fight, facing lost contracts, reduced exports and rising costs. Now, with the US upping tariffs to 104% and China responding at 84%, that pattern of retaliation shows no signs of ending.

Supply chains under pressure

The latest tariffs are already sending shockwaves through global supply chains.

With higher import duties raising costs across the board, companies are reassessing where they source and manufacture goods. Many are relocating operations out of China, seeking alternatives in countries like Vietnam, Thailand and India. However, that’s no simple fix.

Vietnam, a cornerstone of the global athletic footwear supply chain, is among the hardest hit. A 46% tariff now applies to Vietnamese goods headed to the US, compounding the 20% duties already in place for textile-topped athletic shoes.

That’s a serious issue for the likes of Nike, which makes 50% of its footwear in Vietnam, and On, a Swiss sportswear company which manufactures a staggering 90% of its shoes there.

What's more, diversifying supply chains is fraught with challenges. Finding suppliers who meet the required standards, navigating unfamiliar regulations and ensuring stable logistics all complicate the process. For many businesses, relocation is a costly and slow response. 

One company already adjusting is Basic Fun!, known for its Care Bear toys. 

CEO Jay Foreman says he’s halted shipments from China and is considering selling off current stock: "If it doesn't get sorted out, then I'm going to sell down the inventory that I have in my warehouse and pray."

Consumers will likely also feel the impact. With companies absorbing new costs or passing them on, prices at checkouts could rise. 

The broader fallout 

The macroeconomic implications of the ongoing trade war are mounting each day. Higher tariffs raise prices, squeeze margins and weaken business confidence. 

The Bank of England’s Financial Stability Report warns that President Trump’s actions have "contributed to a material increase in the risk to global growth".

In sectors such as agriculture, tech and manufacturing, investment is already drying up. And financial markets are responding in real time. Following Beijing’s announcement, European markets tumbled — the FTSE 100 dropped 3.3%, Germany’s DAX fell 4% and the French CAC 40 also lost 4%.

Meanwhile, European Union member states today voted in favour of imposing tariffs on some US imported goods, which will come into effect from 15 April.

"The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy," the European Commission's statement reads. "The EU has stated its clear preference to find negotiated outcomes with the US, which would be balanced and mutually beneficial."

“The US administration's expanded tariffs signal a broader trend that will reshape supply chains across Europe," comments Vitaliano Tobruk, Supply Chain Industry Practice Lead at Moody’s.

"For companies, this means a sudden recalibration of cost structures, sourcing strategies and market access assumptions. We are witnessing a shift from globally integrated, cost-driven supply chains to more regionally buffered, risk-mitigated models. Nearshoring and friendshoring will accelerate, evolving from buzzwords to boardroom mandates.

"The message is becoming clear: the focus is shifting from purely cost-driven sourcing to prioritising geopolitical resilience.” 

Meanwhile Trump is doubling down. 

He posted on social media: "This is a GREAT time to move your COMPANY into the United States of America. ZERO TARIFFS and almost immediate Electrical/Energy hook ups and approvals. No Environmental Delays. DON’T WAIT, DO IT NOW!"

International tensions and shifting alliances

Beyond economic ramifications, geopolitical dynamics are shifting. China has added six more US firms to its "unreliable entity" list, including aerospace and AI companies, further complicating business operations in the region.

Meanwhile, allies like Japan are reeling. Tokyo faces an estimated US$17bn loss in car exports due to a 25% US tariff. Japanese Prime Minister Shigiru Ishiba labelled the situation a "national crisis," calling for unity and composure.

In Europe, officials prepare countermeasures, with tariffs targeting US motorbikes, luxury boats and orange juice. Even Russia has weighed in, accusing Washington of breaching international trade rules. 

The global system of multilateral trade is under strain and countries are recalibrating relationships and economic strategies in response.

With the US and China entrenched in this escalating conflict, the outlook remains highly uncertain. While American consumers and Chinese businesses are among those most exposed, the ripple effects could be global - but who will suffer more and who will blink first? 

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