The trade standoff between the United States and China intensified this week, with U.S. President Donald Trump simultaneously pulling back on sweeping tariffs for most nations while doubling down on punitive measures aimed squarely at Beijing — escalating what analysts are calling a “powerplay game of brinkmanship” between the world’s two largest economies.

Trump’s unexpected decision to pause hefty new duties for dozens of countries on Wednesday brought brief relief to global markets, which had been battered by the announcement of broad tariffs just 24 hours earlier. U.S. stock indexes soared, with the S&P 500 closing up 9.5%, and Japan’s Nikkei index jumped 8% in Thursday trading.

But the reprieve has done little to slow the U.S.-China economic confrontation. Tariffs on Chinese goods were immediately raised to 125%, up from the 104% level enacted the day before, intensifying the pressure on Chinese exporters and U.S. importers alike.

China Hits Back Hard

According to Reuters, Beijing responded in kind, imposing 84% tariffs on U.S. imports and vowing to “fight to the end.” In a bid to bolster economic ties elsewhere, China began talks with the European Union and Malaysia while extending an offer to Australia to join a cooperative trade front — an offer that Canberra quickly rebuffed.

“We are not going to be holding hands with China in respect of any contest that is going on in the world,” said Australian Deputy Prime Minister Richard Marles.

Meanwhile, Chinese companies that sell products on Amazon are already preparing to raise prices for U.S. consumers or exit the American market altogether, citing the “unprecedented blow” of the tariffs.

FILE PHOTO: A trader gestures while working on the floor at the New York Stock Exchange (NYSE) in New York City after the White House announced a 90-day pause & lowered 10% reciprocal tariff for other countries, U.S., April 9, 2025. REUTERS/Brendan McDermid TPX IMAGES OF THE DAY/File Photo

Market Chaos and Policy Whiplash

The abrupt backtracking on tariffs — described by U.S. Treasury Secretary Scott Bessent as a calculated strategy — followed days of intense market volatility that wiped trillions from global stock valuations and sent U.S. bond yields soaring.

“You have to be flexible,” Trump said on Wednesday, in contrast to his earlier declarations that the tariffs were non-negotiable. He admitted that the market reaction had influenced his thinking.

Despite that flexibility, a blanket 10% tariff on nearly all U.S. imports remains in effect, and specific levies on autos, steel, aluminum, and fentanyl-related goods from Canada and Mexico are untouched.

The administration says the 90-day tariff pause is designed to bring trading partners to the bargaining table, and talks have already begun with Vietnam, Japan, and South Korea. Still, Trump made clear that China remains the top target.

“China wants to make a deal,” he told reporters. “They just don’t know how quite to go about it.”

Bessent, who is leading negotiations with over 75 countries, said the president’s strategy was to create “maximum negotiating leverage.”

“You might even say that he goaded China into a bad position,” Bessent remarked.

U.S. Secretary of the Treasury Scott Bessent and White House Press Secretary Karoline Leavitt speak to the news media about the latest tariff announcement from President Donald Trump, at the White House, in Washington, D.C., U.S. April 9, 2025. REUTERS/Leah Millis

Economic Fallout and Recession Fears

While markets briefly surged, analysts warned the relief may be temporary. The Goldman Sachs economic team cut its recession probability from 65% to 45%, but still forecast a 15% increase in the overall U.S. tariff rate, which could weigh heavily on business investment and consumer spending.

A Reuters/Ipsos poll revealed that three out of four Americans expect prices to rise in the coming months due to the ongoing trade war. Treasury Secretary Bessent dismissed concerns about the volatility, framing the strategy as a necessary shock to revive fairer global trade practices.

But with the yuan falling to its weakest level since the global financial crisis and U.S. consumers bracing for higher costs, economists say the risk of a prolonged trade conflict remains significant.

Trump, ever confident in his approach, urged Americans on his Truth Social platform:

“BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!”
Later adding: “THIS IS A GREAT TIME TO BUY!!!”