In a direct and sweeping countermeasure to the United States’ 54% tariff on Chinese imports, China on April 4 announced it will impose an additional 34% tariff on all American goods, effective April 10. The dramatic escalation in trade tensions between the world’s two largest economies sent global financial markets into renewed turmoil, deepening fears of a recession, disrupting global supply chains, and stoking volatility across asset classes. The announcement was accompanied by a set of retaliatory actions targeting key U.S. sectors and companies, including restrictions on rare earth exports and blacklisting of American firms.

China Responds Forcefully: Tariffs, Blacklists, and Export Curbs

The Chinese Ministry of Commerce stated that this round of retaliatory tariffs would apply to all categories of U.S. exports, affecting billions in bilateral trade. The country also launched a trade investigation into CT X-ray tubes imported from the U.S. and India, signaling a broader protectionist shift in its healthcare technology procurement.

In addition, China:

Banned imports of poultry from two major American companies
Added 11 American firms to its “unreliable entities” list, effectively barring them from operating or forming joint ventures in China
Restricted exports of rare earth elements like gadolinium and yttrium, critical inputs for sectors including electric vehicles, semiconductors, and defense

These minerals are strategic trade levers since China holds a near-monopoly over their global supply, producing more than 80% of rare earth elements. The move is likely to strain U.S. manufacturing sectors that rely heavily on these materials.

Highlights:

China’s 34% tariff targets all U.S. goods, effective April 10
Rare earth export controls threaten U.S. tech, defense, and green energy sectors
U.S. firms blacklisted include key defense and biotech players

Tariff Spat Triggers Market Collapse: Wall Street Futures Nosedive

Wall Street futures extended their slide after the news broke, building on Thursday’s historic market rout. By late afternoon IST:

S&P 500 futures fell 2.2%, after a 4.8% drop in the cash index Thursday
Nasdaq futures dropped 2.5%, adding to a 5.4% crash
Dow Jones futures plunged over 1,000 points
The VIX index, Wall Street’s “fear gauge,” surged to 33, the highest since August 2023

The widespread volatility follows growing investor concern that the Trump tariffs, coupled with retaliatory action from China and the EU, could trigger a global recession, paralyze international trade, and dent corporate earnings across industries.

Highlights:

Wall Street futures fall sharply; Dow down 1,000+ points in premarket
VIX hits 8-month high, signaling extreme investor fear
Tech-heavy Nasdaq and S&P 500 in correction territory

Diplomatic Freeze, Drug Trade Allegations Deepen US-China Divide

Tensions between Washington and Beijing are at their lowest since the original U.S.-China trade war under the Trump administration. President Trump, who resumed office in January, has not yet spoken to Chinese President Xi Jinping, underlining the diplomatic impasse.

A significant flashpoint has been the alleged flow of fentanyl from China to the U.S., which Trump continues to cite as a reason behind escalating tariffs. The fentanyl crisis has become a recurring theme in U.S. political discourse, and it has bled into trade policy, further complicating negotiations.

Highlights:

Trump cites fentanyl crisis as justification for multiple tariff rounds
No contact between Trump and Xi more than 60 days into U.S. presidency
Bilateral trade pact discussions appear frozen

JP Morgan Raises Global Recession Risk to 60%

In response to recent developments, JP Morgan issued a stark warning, raising the probability of a global recession to 60%, up from 40%, citing escalating protectionism, breakdown in diplomacy, and collapse in investor confidence.

“The current measures from both the U.S. and China represent the most significant tax burden on trade since the 1930s,” the bank’s chief economist Bruce Kasman wrote, echoing a sentiment of alarm that is now shared across Wall Street.

Highlights: