The US-China trade war is getting even uglier

• The US-China trade war has escalated with sweeping new tariffs and fresh export bans from Beijing.
• Trump is threatening 50% tariffs on top of the 54% he's already announced.
• Beijing calls that "a mistake on top of a mistake" and vowed its own countermeasures.

The US and China could be heading for a long standoff in their trade war, risking collateral damage for economies and markets the world over.

On Friday, China announced sweeping retaliatory tariffs of 34% tariff on all US imports — showing that Beijing isn't taking President Donald Trump's tariffs lying down. The world's second-largest economy also announced fresh export bans on rare earths.

On Monday, Trump hit back with a fresh threat of an additional 50% in tariffs on China — on top of a total 54% he announced since taking office — if Beijing doesn't withdraw its retaliatory tariffs.

On Tuesday, the row between the world's two largest economies intensified, with China's Commerce Ministry calling Trump's latest threat "a mistake on top of a mistake."

"If the US insists on its own way, China will fight to the end," said a spokesperson from the ministry in a statement. The ministry vowed countermeasures if more US tariffs are put in place.

The intensifying spat between the world's two largest economies contributed to a worsening market rout globally.

"Unlike the previous two rounds, in which the tit-for-tat tariff response was more restrained, targeting some specific categories of US imports, this time, Beijing announced a plain, simple and blanket tariff hike," wrote Nomura economists on Monday.

The trade war will be painful for Americans — and for everyone else.

"Near-term pain all around (US included!) is guaranteed if the US does not dial-back on blanket tariffs as industries are hit by margin squeeze and households are hammered by acute affordability woes," wrote Vishnu Varathan, Mizuho's head of macro research for Asia excluding Japan, in a Monday note.

Some Americans are already snapping up essential items to beat price inflation that's likely to set in as importing companies pass on the cost of tariffs to consumers. Others are slowing purchases of luxury items, Business Insider reported last week.

Meanwhile, many are witnessing their investments slump due to a historic global stock rout as markets sound the alarm on a potential economic downturn.

"Needless devastation by way of collateral damage all around will be hard to avert as aggregate demand slumps accentuated by a sharp drop in demand for capital goods as uncertainty paralyzes investments," wrote Varathan.

Analysts are not expecting a quick resolution, with those from the Eurasia Group citing "mismatched negotiation styles" between Trump and Chinese leader Xi Jinping.

Beijing's cards

China's countermeasures — which exceeded expectations — likely reflect the country's perception that the US's latest tariff move is extreme. Beijing probably views Washington's efforts to target Chinese exports through third countries as "comprehensive and malicious," wrote analysts at Eurasia Group, a risk consultancy, in a Friday note.

And there's no guarantee that Xi wants a deal.

"Strong, symmetric, tit-for-tat tariff retaliation is a precondition for Beijing to come to the negotiating table. President Xi Jinping cannot engage in talks from a position of relative weakness," wrote the Eurasia Group analysts.

Even though the US has significant leverage from its status as the world's largest economy and consuming market, China has its own cards.

"The bluff Beijing is calling is evident. Imports substitution is simply not an option for the US. Not right now," wrote Varathan.

Trump has made it clear that he wants manufacturing jobs back in the US.

That won't be an easy transition, with challenges including long lead times to construct manufacturing facilities and extensive supply chains located elsewhere.

Trump doubled down on his new tariffs on Sunday night, saying they are necessary to rectify America's trade deficits with other countries.

"I don't want anything to go down, but sometimes you have to take medicine to fix something," Trump told reporters.

April 8, 2025 — This story has been updated to include Trump and the Chinese Commerce Ministry's latest responses.