Stocks Plunge as China Retaliates with 34% Tariffs on U.S. Goods in Escalating Trade War

By James, Admin
April 4, 2025 – 5:00 PM CST, Chicago, IL

The U.S. stock market took a nosedive today, April 4, 2025, as China announced a retaliatory 34% tariff on all U.S. goods, intensifying an already heated trade war with the United States. The Dow Jones Industrial Average plummeted 2,200 points, a staggering 5.5% drop, marking its worst single-day decline since the COVID-19 pandemic shook global markets in 2020.

This sharp reaction followed President Donald Trump’s recent imposition of sweeping tariffs on Chinese imports, which had already raised the total U.S. levy on Chinese goods to 54%, a move Beijing labeled as “unilateral bullying.”

China’s Finance Ministry wasted no time in responding, declaring the new tariffs effective April 10, alongside additional measures like export controls on rare earth minerals critical to high-tech manufacturing. The announcement sent shockwaves through Wall Street, with the S&P 500 shedding nearly 6% and the Nasdaq Composite tumbling 5.8%, pushing it into bear market territory—down over 20% from its December peak. Investors, already jittery from Trump’s tariff rollout earlier this week, now fear a prolonged global trade conflict that could tip economies into recession.

The trade war’s escalation began Wednesday when Trump unveiled a 10% baseline tariff on all U.S. trading partners, with steeper duties targeting nations like China, Vietnam, and Taiwan. China’s countermeasures, however, stole the spotlight today, matching the U.S.’s 34% reciprocal tariff rate and signaling no immediate appetite for negotiation. Analysts at J.P. Morgan raised their global recession odds to 60%, up from 40%, citing the tit-for-tat escalation as a major threat to economic stability.

U.S. businesses braced for impact as the news unfolded, with companies like Apple and Nike—reliant on Chinese supply chains—seeing shares drop over 7%. The closure of a trade loophole allowing low-value Chinese packages to enter the U.S. duty-free, effective May 2, further complicates matters for e-commerce giants like Temu and Shein. Meanwhile, American farmers expressed alarm as China’s tariffs threaten agricultural exports, potentially opening doors for competitors like Brazil and Australia.

Trump remained defiant, posting on Truth Social that “China played it wrong, they panicked,” while insisting his policies would make investors “richer than ever before.” Critics, including Republican Senator Ted Cruz, warned of “enormous risks” to the U.S. economy, with Cruz suggesting the tariffs could cost jobs and hurt GOP prospects in 2026 midterms. Federal Reserve Chair Jerome Powell added to the unease, noting that the tariffs—larger than anticipated—could fuel inflation and stall growth, leaving rate cuts uncertain.

Global markets mirrored the U.S. decline, with Europe’s major indexes dropping 4-6% and Japan’s banking sector facing its worst week in years. The European Union’s trade commissioner, Maros Sefcovic, called the U.S. tariffs “damaging” after a tense call with U.S. officials, hinting at potential EU retaliation. Smaller nations like Cambodia and Vietnam, hit with tariffs of 49% and 46% respectively, scrambled to negotiate exemptions, though Trump signaled openness to talks with Vietnam after a “productive call” today.

The broader implications are stark: J.P. Morgan estimates U.S. growth could shrink by two percentage points this year if the trade war persists. Consumer prices are expected to rise, with households potentially facing an extra $1,000 annually for everyday goods, according to Nationwide’s chief economist Kathy Bostjancic. Businesses, caught off-guard by the tariffs’ scope, may delay hiring and investments, further eroding confidence as the standoff deepens.

China’s retaliatory playbook also included adding 11 U.S. companies to its “unreliable entities” list, barring them from Chinese markets, and launching trade probes into American medical imaging exports. Beijing’s Commerce Ministry justified the moves as a defense of “legitimate rights,” accusing the U.S. of violating international trade rules. The rare earth export curbs, targeting materials used in everything from electric vehicles to smart bombs, underscore China’s leverage in the conflict.

Despite the chaos, Trump pointed to a strong U.S. jobs report released today—more on that later—as proof his strategy is working, though the data predates the latest tariff salvo. Economists caution that the labor market’s resilience may not hold if trade tensions persist, with Goldman Sachs predicting a potential unemployment spike to 5.3% by year-end. For now, markets remain on edge, bracing for further retaliation from China and other U.S. trading partners.
​
The day closed with a sense of foreboding, as the S&P 500 capped its worst week since 2020 and oil prices hit a three-year low amid demand fears. Investors and analysts alike are left wondering how far this trade war will go—and whether Trump’s gamble will reshape the global economy or unravel it entirely.