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President Trump’s ‘Liberation Day’ tariffs risk domino effect across the globe as Chinese goods look for new markets

President Trump’s jumbo tariffs on China threaten to create a new problem for a global economy already stressed over trade: a $400 billion deluge of Chinese goods looking for new markets.

U.S. consumers and businesses learned Wednesday that, from April 9, Chinese imports will face tariffs of around 70% on average, after Trump walloped China with stiff new duties as part of his “Liberation Day” trade broadside. The new tariffs will likely push up prices in the U.S. for products ranging from consumer electronics and toys to machinery and essential components for manufacturing.

That towering tariff wall also risks diverting some U.S.-bound Chinese exports into a global market already swimming in China-made goods, worsening a so-called China shock that is facing pushback from countries around the world, according to economists. Other major exporters, such as Vietnam, South Korea and Japan, could also see barriers to their exports proliferate as U.S. spending on imports falls and their exports get shunted to new destinations.

Economists note that such domino effects underscore how trade wars can quickly escalate, drawing in more countries as retaliatory measures fly and defensive barriers go up.

“The real fireworks are yet to come,” said Michael Pettis, a professor of finance at Peking University in Beijing who has written extensively about global trade.

President Trump on Wednesday announced plans to levy tariffs on a range of U.S. trading partners that he accuses of taking advantage of the U.S. by boosting exports while keeping their own barriers to imports high.

China, regarded by many in Trump’s orbit as the U.S.’s chief geopolitical foe, was hit especially hard. Chinese imports will be slapped with a 34% duty. That new tariff rate was stacked on top of a 10% tariff levied in February, another 10% added in March and a range of other tariffs imposed during Joe Biden’s presidency and Trump’s first term in office. That lifts the average rate on Chinese imports to around 70%, according to economists.

It will be hard for other countries to absorb Chinese exports that normally went to the huge U.S. market. The U.S. in 2024 imported around $440 billion of goods from China, according to Census Bureau data. China in 2023 was the source of a fifth of iron and steel products imported into the U.S., more than a quarter of its imported electronics, a third of its imported footwear and three-quarters of its imported toys, according to data from the International Trade Centre, an agency of the United Nations and the World Trade Organization. Ninety-one percent of U.S. umbrella imports came from China.

U.S. imports from China are unlikely to drop to zero overnight. Consumers might be able to find alternatives to some Chinese-made products, but not others, and manufacturers outsource big chunks of their production to Chinese factories. Even if they manufacture goods at home, they are often bringing in parts and basic materials from China that can be hard to find elsewhere.

Lower U.S. spending on Chinese imports means unsold goods have to go somewhere else. Yet surging Chinese exports are already jacking up tensions between China and the world’s big economies, and could rise further if exporters try to unload what had been U.S.-bound shipments to other countries.

Since Trump launched his trade war in 2018, China has been the subject of almost 500 antidumping rulings and investigations, according to Global Trade Alert, a Switzerland-based nonprofit that tracks global trade policy.

Chinese leader Xi Jinping has poured investment into manufacturing to support advanced technology and pump up growth amid an epic property crunch and tepid consumer spending. The result has been a surge in exports, as companies hunt for overseas buyers to soak up goods they can’t sell at home. China last year posted a trade surplus of $1 trillion. Countries have moved to shield domestic industries from cut-price Chinese competition in response.

Last year alone, Brazil opened antidumping probes into imports from China of hypodermic needles, optical fibers, nebulizers and polyester mesh; Mexico and Canada opened investigations into aluminum, steel and chemicals; the U.K.’s trade protection agency recommended excavators from China be hit with antidumping duties of up to 84% after a rush of imports; and the European Union raised tariffs on Chinese electric vehicles following an investigation that concluded Chinese carmakers received hefty subsidies.

With the U.S. raising tariffs, “there just aren’t other big markets that can easily absorb the immense scale of China’s manufacturing capacity,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former U.S. Treasury official.

One way to ease trade tensions would be for China to boost spending at home, economists say, which might help soak up its industrial production and suck in more imports from other countries.

Beijing has announced plans to borrow and spend more to shore up growth and pep up consumer spending. But given the unexpected scale of Trump’s tariff blitz, economists say it will probably need to do more, such as cut interest rates, lift government borrowing further and find ways to rekindle beaten-down consumer confidence, perhaps by drawing a line under its drawn-out real estate bust.

Yu Xiangrong, chief China economist at Citi, said that without more stimulus, the additional tariffs will shave between 0.5 and 1 percentage point off Chinese growth this year.

Beijing said on Thursday that it would deploy “resolute” countermeasures against the latest tariffs on Chinese goods, though it didn’t immediately say what those were. In response to Trump’s earlier tariffs, China retaliated with tariffs of 15% on imports of U.S. chicken, wheat, corn and cotton and 10% duties on soybeans and beef. It also added a string of U.S. companies to export control and corporate blacklists.

“History has proved that raising tariffs will not solve the problems of the U.S. itself, and will not only harm the interests of the U.S., but also jeopardize the development of the global economy,” China’s Ministry of Commerce said in a statement Thursday.

The European Union, Japan, South Korea, Vietnam and a host of other countries were also hit with hefty new U.S. levies Wednesday. Countries not singled out for “reciprocal” tariffs by Trump weren’t unscathed: A flat 10% tariff rate will be applied to imports from all countries on April 5, he said.

Administration is trying to head off painful retaliatory measures, forcing big trading partners to decide whether fighting is worth it

Leaders from Canada, Europe and China are threatening stiff countermeasures against the U.S. in response to President Trump’s surprisingly steep tariffs on nearly all imports. The administration’s response is, don’t even think about it.

Trump is trying to short-circuit the trade war’s cycle of retaliation by threatening massive new tariffs on any country that responds, and by dangling the prospect of a better deal for those who hold their fire and negotiate. The highest tariffs—the so-called reciprocal duties for many countries with goods-trade imbalances with the U.S.—don’t go into effect until Wednesday, giving world leaders time to plead their cases with a president who considers himself a master dealmaker.

“Every country’s called us,” Trump told reporters Thursday. “That’s the beauty of what we do. We’re in the driver’s seat.”

Will he make deals to lower tariffs? “It depends,” Trump said. “As long as they are giving us something good.”

So far, much of the world is holding out hope for a deal. Anthony Albanese, the prime minister of Australia, which has a free-trade agreement with the U.S. but now faces 10% tariffs, said his government wouldn’t join a “race to the bottom” by retaliating. Japan, which will be subject to 24% tariffs, didn’t immediately announce plans to retaliate. India, facing a 26% tariff, according to Trump’s executive order, indicated it had no plans to retaliate.

Even the two countries that have retaliated—China, which faces tariffs of up to 70% now, and Canada, which went from a no-tariff free-trade agreement to 25% tariffs on many exports—have held back their most potent weapons.

For Canada, that is in part because Trump threatened to double tariffs on the country when Ontario’s provincial leader began taxing electricity exported to the U.S. at 25%. Similarly, Trump threatened 200% tariffs on European alcoholic beverages, including Champagne, after the European Union said its retaliation against earlier steel and aluminum levies would include a 50% tariff on American whiskey. The EU delayed implementing the first of those duties—which the bloc said would eventually hit up to $28 billion of American products—until mid-April in hopes of striking a deal.

Now European and Canadian leaders are walking a tightrope, trying to project strength with countermeasures while still holding out hope for talks with Trump.

EU Trade Commissioner Maroš Šefčovič, who is scheduled to hold a video call with U.S. trade officials Friday, said he would work “round the clock” in pursuit of a deal with the Trump administration.

Retaliating countries have a dilemma. The U.S. imports more goods from Europe, China and Canada than it exports to them, which has long angered Trump and also limits their abilities to respond with tit-for-tat tariffs. They also want to avoid putting levies on products they need and can’t easily obtain from other trading partners.

Countries that retaliate against the U.S. risk worsening their own economic problems, said Barry Appleton, co-director of New York Law School’s Center for International Law. “It’s like putting your head in a lion’s mouth,” he said. “Don’t do that.”

Europe is laying the groundwork for a novel response that could target America where it hurts the most: its superiority in services exports.

Targeting big American tech companies such as Alphabet or Meta Platforms, or taking other measures to restrict U.S. services, is widely viewed as a last resort for the bloc because doing so could provoke a harsh reaction from the Trump administration and damage the EU’s reputation as an open market. There is also a risk of raising costs for consumers or having unintended consequences for European companies.

“Sometimes it’s important to have a gun, and sometimes it’s also important to put it on the table, even if you’re not using it,” said Bernd Lange, who chairs the European Parliament’s trade committee.

French President Emmanuel Macron said the EU could activate a new law that allows the bloc to respond to a country’s attempt to use economic coercion against it. Options for retaliation under the law are wide-ranging and include the ability to restrict services companies’ access to the market or curb the enforcement of intellectual-property rights.

Macron called on industries “to remain united, to be determined,” rather than making one-off deals or announcing investments in an attempt to negotiate exemptions with Washington.

“What would the message be of having major European actors investing billions of euros in the American economy at a time when they are hitting us?” Macron said. “We need to have solidarity.”

Administration officials and Trump allies have said such an aggressive posture against Trump is exactly the wrong move.

“I wouldn’t want to be the last country that tries to negotiate a trade deal,” Trump’s son Eric Trump said on X. “The first to negotiate will win—the last will absolutely lose. I have seen this movie my entire life.”

Administration officials have indicated that Trump isn’t willing to budge on the broad outlines of his trade policies. Almost every import will now be subject to at least a 10% tariff, a level that officials described as a floor. But there is negotiating room regarding the higher tariffs on select countries that have large trade surpluses with the U.S.

Commerce Secretary Howard Lutnick said tariffs on China would come down if it stopped the export of the ingredients used to make the drug fentanyl.

“All they have to have is a phone call from President Xi to President Trump saying I’m going to end fentanyl production that’s killing Americans and it drops 20%,” he told Bloomberg Television.

Instead, China came out swinging Thursday. A Commerce Ministry statement said the tariffs “violate international trade rules, severely infringe the legitimate rights of relevant parties and represent a typical act of unilateral bullying.” But the ministry didn’t specify which further steps were planned.

In Canada, Prime Minister Mark Carney announced new 25% tariffs on a range of autos imported from the U.S., in response to U.S. tariffs on foreign-made cars. He and Trump have pledged to begin hashing out trade disagreements after Canada’s April 28 election, but he expressed pessimism about striking a good deal with Trump.

“I don’t want to give false hope,” Carney said Thursday. Although the tariff policy “will hurt American families, until that pain becomes impossible to ignore, I do not believe the administration will change direction,” he added.

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