The finance ministry of China has increased tariffs on specific imports from the US to 125%, mirroring the latest actions taken by the United States and highlighting the ongoing tensions in the trade dispute.
This adjustment was made public early Friday and follows Beijing’s recent decision to raise duties to 84%, which came in response to Washington’s implementation of higher taxes on Chinese imports.
The new tariffs went into effect immediately, backed by pointed remarks from Chinese officials who termed the measures a protective reaction to what they labeled as unilateral economic aggression.
Officials from the Chinese foreign ministry described the actions of the US as “hegemonic” and “bullying,” while the commerce ministry criticized the move as a “mistake upon a mistake.” According to reports, Beijing asserted that it would refrain from further escalation but cautioned against ongoing US tariff pressures, calling the latest increase contrary to norms of international economics.
Market Response Reflects Diverging Risk Perspectives
The reaction in financial markets exhibited uncertainty regarding the extent to which the tariff increase would impact global trade and capital dynamics. Traditional safe-haven assets experienced slight increases, while riskier investments showed mixed results.
Bitcoin, which had seen a decline of about 0.60% prior to the announcement amid a broader sell-off of risk assets, experienced a brief recovery after 9:00 A.M GMT but ultimately remained relatively unchanged at $81,292.68, marking a 0.07% decrease for the day.
This varied response highlights the ongoing discussion regarding Bitcoin’s status as a macro hedge. Some investors view it as a store of value during periods of geopolitical tension, while others perceive it as a high-risk asset influenced by overall market sentiment. The lack of consensus reflects patterns seen during previous trade conflicts, demonstrating that crypto’s usefulness as a safe-haven asset is context-dependent.
In contrast, gold steadily increased, showing a gain of 0.35% throughout the session. The metal’s upward trend persisted following the announcement, aligning with past instances of trade friction. This behavior indicated a shift in capital from equities to more resilient hard assets that could withstand the impact of reduced trade volumes.
US Treasury bonds also saw a rise in demand. Prices for the 10-year bond improved by 0.12%, leading to lower yields and indicating a cautious sentiment from investors. Falling yields typically suggest expectations of slower economic growth or possible future reductions in Federal Reserve interest rates.
This increase in demand fits within a broader risk-averse mentality, especially as forecasts for further policy tightening or retaliatory measures loom. Nonetheless, it contrasts with the recent downturns in bond prices alongside equities. While the shift was small, it signals a revival in interest for US bonds as a safe haven following earlier sell-offs.
Oil Prices Tumble, Yuan Remains Stable
Oil exhibited the sharpest decline among assets, dropping 1.02% as traders adjusted their expectations for demand, anticipating that prolonged trade disputes might hinder global industrial activity. This movement reflects sensitivities to economic indicators suggesting that trade barriers could dampen energy consumption, particularly in regions heavy on manufacturing.
On the other hand, Chinese bonds showed little change overall. The proxy for the 10-year Chinese government bond experienced a slight increase of only 0.01%, possibly indicating that the market has fully priced in recent developments or anticipating that the People’s Bank of China will step in to maintain currency stability. Such minor fluctuations hint that investors expect limited short-term volatility in foreign exchange markets despite the tariff hikes.
The S&P 500 (using SPY as a proxy) declined by 0.63% in pre-market trading, reflecting a cautious outlook and an ongoing trend of moving away from equities.
Wider Trade Context
This latest increase in tariffs follows a cycle of reciprocal measures that began with the previous administration’s extensive import tax policies. Since the onset of the trade conflict, China has consistently matched the US’s escalations with similar tariff raises, resulting in historically high duty rates for both entities, with the 125% tariff now becoming the standard for numerous products.
Separately, Taiwanese President Lai Ching-te mentioned that Taiwan is in preliminary discussions with Washington after a temporary pause that lowered US tariffs on the island’s exports from 32% to a baseline of 10%. Reports indicate that his administration remains focused on achieving favorable outcomes to safeguard industrial interests.
It remains unclear whether this new tariff threshold will hold or provoke additional retaliation. Currently, investors appear split in their interpretations of what heightened tariffs communicate—either a turning point in trade relations or a more entrenched divide between the world’s two largest economies.
While commodities like gold and bonds continue to react to geopolitical risks in conventional ways, Bitcoin’s identity straddles a line between the two extremes. Its lack of a definitive directional trend may indicate a broader reluctance to assign it a specific role during macroeconomic crises, at least until clearer signals emerge from central banks or geopolitical players.