China has sharply escalated its trade conflict with the United States, raising tariffs on American goods to 125%, up from the previous rate of 84%.
This latest move, announced by the Chinese Ministry of Finance, is a direct response to a series of steep tariffs imposed by the U.S. under President Donald Trump’s administration, which now brings the total effective U.S. tariff rate on Chinese imports to approximately 145%.
The Chinese ministry issued a firm statement saying that continued tariff hikes by the U.S. no longer hold economic weight and will only damage global credibility. According to a translated statement, “The U.S. increasing tariffs further has lost practical value and has become economically irrational.” The ministry also warned that U.S. goods are becoming uncompetitive in the Chinese market due to the rising costs, effectively eliminating demand.
Earlier this week, Trump signed an executive order that intensified tariffs on a range of Chinese goods to 125%, adding to an earlier 20% hike in tariffs linked to fentanyl-related imports. This stacked tariff regime has raised serious concerns about worsening disruptions in the global trade network.
Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, remarked that both nations have now maxed out their tariff options. “This signals the end of the tit-for-tat phase, at least in terms of further tariff increases,” he said, adding that the next phase would involve assessing the broader economic fallout.
Despite the strong retaliatory posture, China has not yet announced export control measures or expanded its so-called “unreliable entity list,” which would further penalize American companies operating within China. Analysts see this as a sign that while China is retaliating forcefully, it is still leaving room for potential negotiation.
Nonetheless, the broader tone from Beijing remains defiant. In a separate statement, a spokesperson from China’s Commerce Ministry reiterated the country’s willingness to engage in dialogue, but only if it’s conducted on equal terms.
The chances for a diplomatic breakthrough appear slim. Over the past week, China has issued back-to-back retaliatory tariffs and regulatory pressures on American businesses, significantly diminishing hopes for a quick resolution. The U.S. has also doubled down on its position, with Treasury Secretary Scott Bessent labeling China as “the worst offender in the international trading system.” He criticized Beijing for its unbalanced economy and stated that the continued escalation would ultimately hurt China more than the U.S.
Economic analysts are already revising forecasts in light of the ongoing dispute. Goldman Sachs, for example, downgraded its projection for China’s 2025 GDP growth to 4%, citing the impact of trade friction with the U.S. and sluggish global demand. While trade with the U.S. constitutes only about 3% of China’s GDP, Goldman warned the ripple effects could be substantial, especially on employment. The firm estimates that between 10 million and 20 million Chinese workers are directly tied to export-related industries targeting the U.S. market.
Meanwhile, Chinese leadership remains vocal in its criticism of the escalating tariffs. During a meeting with Spanish Prime Minister Pedro Sánchez, President Xi Jinping warned that a tariff war benefits no one. “Opposing global consensus and imposing isolationist policies will only backfire,” Xi said, reaffirming China’s intention to deepen international partnerships, particularly in trade and innovation.
Despite the rising tension, both sides have refrained from completely severing trade channels. However, unless negotiations resume soon, the prolonged standoff could deal a serious blow to global supply chains and investor confidence in the world’s two largest economies.
