Markets on edge as 104% U.S. tariff hits China: Is retaliation the next big shock?
The benchmark Sensex gained 1,089.18 points, or 1.49%, to end at 74,227.08, while the Nifty 50 rose 374.25 points, or 1.69%, to close at 22,535.85.
- Apr 8, 2025,
- Updated Apr 8, 2025 11:11 PM IST
A day after President Trump warned of additional levies if Beijing didn’t withdraw its 34% retaliatory duties, his administration has reportedly decided to act. According to Bloomberg, the higher tariff—an additional 50% over existing duties—will take effect from midnight on Wednesday, potentially triggering a full-blown escalation between the world’s two largest economies.
Indian markets closed higher on Tuesday, recovering from their steepest slide in ten months. The benchmark Sensex gained 1,089.18 points, or 1.49%, to end at 74,227.08, while the Nifty 50 rose 374.25 points, or 1.69%, to close at 22,535.85. The rally was driven by bargain buying and optimism that a broader global reset in trade ties—especially between the U.S. and key partners—could ease tensions.
“Following positive global cues, led by the interest of many nations to enter into bilateral agreements with the U.S., the domestic market witnessed a recovery,” said Vinod Nair, Head of Research at Geojit Investments. “This optimism stems from the fact that the Indian economy is more driven by local demand and low reciprocal tariff and ongoing trade negotiations with the U.S.”
However, the global backdrop remains tense. China, caught off guard by Washington's aggressive tariff stance, is expected to retaliate across multiple fronts. The yuan may be allowed to slide further to maintain export competitiveness. Export restrictions on rare earth elements could tighten, and U.S. firms listed under China’s “unreliable entities” designation may face targeted sanctions.
Beijing has already imposed a 34% tariff on all U.S. goods and suspended key agricultural imports. It’s also working to deepen trade relationships with the EU and other partners to reduce dependency on the American market.
Diplomatically, talks may collapse. Trump has threatened to walk away from negotiations altogether, and China could respond by strengthening its global alliances. Domestically, China is expected to accelerate consumption-driven growth and double down on high-tech self-sufficiency.
According to the U.S. Trade Representative, the U.S. imported $438 billion in goods from China in 2024 versus $143 billion in exports—leaving a $295 billion gap. Any disruption risks a sharp jolt to both economies.
“Taxes on physical goods aside, both countries are economically intertwined in a lot of ways,” Deborah Elms, Head of Trade Policy at the Hinrich Foundation, was quoted as saying in a BBC report. “You can only tariff so much for so long… but there are many ways in which it can get worse.”
Experts warn of further ripple effects, especially across Southeast Asia, as displaced Chinese goods flood alternative markets.
“It’s unclear what is motivating these tariffs,” said Roland Rajah, lead economist at the Lowy Institute. “There’s retaliation to save face and there’s pulling out the whole arsenal. It’s not clear if China wants to go down that path. It just might.”
Talks remain stalled. Trump and Xi haven’t spoken, and though Beijing says it’s open to dialogue, few are hopeful.
A day after President Trump warned of additional levies if Beijing didn’t withdraw its 34% retaliatory duties, his administration has reportedly decided to act. According to Bloomberg, the higher tariff—an additional 50% over existing duties—will take effect from midnight on Wednesday, potentially triggering a full-blown escalation between the world’s two largest economies.
Indian markets closed higher on Tuesday, recovering from their steepest slide in ten months. The benchmark Sensex gained 1,089.18 points, or 1.49%, to end at 74,227.08, while the Nifty 50 rose 374.25 points, or 1.69%, to close at 22,535.85. The rally was driven by bargain buying and optimism that a broader global reset in trade ties—especially between the U.S. and key partners—could ease tensions.
“Following positive global cues, led by the interest of many nations to enter into bilateral agreements with the U.S., the domestic market witnessed a recovery,” said Vinod Nair, Head of Research at Geojit Investments. “This optimism stems from the fact that the Indian economy is more driven by local demand and low reciprocal tariff and ongoing trade negotiations with the U.S.”
However, the global backdrop remains tense. China, caught off guard by Washington's aggressive tariff stance, is expected to retaliate across multiple fronts. The yuan may be allowed to slide further to maintain export competitiveness. Export restrictions on rare earth elements could tighten, and U.S. firms listed under China’s “unreliable entities” designation may face targeted sanctions.
Beijing has already imposed a 34% tariff on all U.S. goods and suspended key agricultural imports. It’s also working to deepen trade relationships with the EU and other partners to reduce dependency on the American market.
Diplomatically, talks may collapse. Trump has threatened to walk away from negotiations altogether, and China could respond by strengthening its global alliances. Domestically, China is expected to accelerate consumption-driven growth and double down on high-tech self-sufficiency.
According to the U.S. Trade Representative, the U.S. imported $438 billion in goods from China in 2024 versus $143 billion in exports—leaving a $295 billion gap. Any disruption risks a sharp jolt to both economies.
“Taxes on physical goods aside, both countries are economically intertwined in a lot of ways,” Deborah Elms, Head of Trade Policy at the Hinrich Foundation, was quoted as saying in a BBC report. “You can only tariff so much for so long… but there are many ways in which it can get worse.”
Experts warn of further ripple effects, especially across Southeast Asia, as displaced Chinese goods flood alternative markets.
“It’s unclear what is motivating these tariffs,” said Roland Rajah, lead economist at the Lowy Institute. “There’s retaliation to save face and there’s pulling out the whole arsenal. It’s not clear if China wants to go down that path. It just might.”
Talks remain stalled. Trump and Xi haven’t spoken, and though Beijing says it’s open to dialogue, few are hopeful.