China 'tit-for-tat' levy builds on market fears as USD loses short-lived gains
China's response to fresh US tariffs, which includes a tit-for-tat 34% levy on American imports among other measures, added to market concerns on Friday afternoon. Global equities extended losses, and the US dollar erased its earlier gains.
Investors are worried, and not only with the direct economic impact of these tariffs, which, given the trade imbalance between the two countries, is set to be far lower than the other way around. The concern is that the move may lead to a potential further escalation of the trade war on the American side.
Following Trump's announcement on Wednesday, Treasury Secretary Bessent confirmed that the outlined US tariffs should be treated as a ceiling and are subject to negotiation – unless countries retaliate.
Whether China's announcements today will lead to more action from Trump's administration remains to be seen, with a few days left until both the US (09/04) and China's (10/04) tariffs are set to kick off.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
