Come Wednesday at midnight tonight, China faces 104% tariffs, perhaps the steepest in Sino-US trade in history, as President Trump decided to heave another 50% tariffs over the 54% tariffs announced earlier to total 104% in retaliation for China’s imposition of 34% tariffs on US made goods.
The tariffs go into effect in over 60 countries even as US President Donald Trump said many countries are waiting to strike deals. The US expects a call from China to negotiate, but so far there has been deathly silence.
White House Press Secretary Karoline Leavitt reaffirmed President Trump’s plan to impose 104% tariffs on China starting Wednesday, saying “There will be 104% tariffs going into effect on China tonight at midnight, but the president believes that [China’s President} Xi and China want to make a deal, they just don’t know how to get that started.”
Stocks took another hit at the news.
Leavitt did not specify steps that may be needed for all the ‘reciprocal tariffs’ to be withdrawn, and Trump has been pretty tight-lipped about what countries can do. In some cases, he’s said it’s not enough for countries to bring their tariffs down to zero because it doesn’t address the trade deficit on goods bought by each country. They range from a couple billion to hundreds of billions of dollars. As of publication, no deals have been made. Earlier in the week, he said there would be no pause or extension for negotiations. China has a trade surplus of $300 billion with US, EU block has a trade surplus of $200 billion with the US and India has a trade surplus of over $50 billion.
The US government has a debt accumulated over years to the tune $9.2 trillion of which $6.5 trillion come up for redemption by august or September this year. Trump has therefore addressed this issue on two fronts 1) geopolitically 2) on the economic front. Geopolitically he has extended an olive branch to Russia, Saudi Arabia and going soft on Middle East oil rich Arab countries.
Trump hopes to raise $700 billion through the tariffs and DOGE administrator Elon Musk has already mopped up in savings around $800 billion through job cuts and layoffs in government positions considered redundant. That makes it $1.5 trillion in the kitty. Though $ 5 trillion are yet to be raised to redeem the debts, what Trump has achieved is he has successfully reduced the burden of debt servicing, that is in terms of payment of interest on the accumulated debt.
That’s a smart move. Treasury Secretary Scott Bessent is said to be behind the master stroke of tariffs though he has publicly admitted that one could not rule out the possibility of America being pushed into a recessionary phase as manufacturing could slow down and cost of imported goods could rise very substantially. A $50 toy from China could now cost upwards of $100.
That’s the scenario — if that’s the market projection, then truly America could be pushed into recession unless local manufacturers pick up the challenge and start manufacturing goods that would cost less than imported goods. Vietnam, Cambodia, and Bangladesh face tariffs of over 45% and India 27%. These countries export garments and eatables and grains such as Rice to America. As garments and groceries become costlier, India would stand to benefit as its condiments and grains such as rice and wheat would be cheaper and garments less costly.
LET’S MAKE A DEAL
Trump said tariff negotiations with South Korea, which has a free trade agreement with the U.S., have led to “the confines and probability of a great deal for both countries.”
Trump posted that a wide-ranging economic deal may be in the works with South Korea following a call with the country’s acting president. However, no specific details of a possible deal have been released.
So far, leaders of Japan, Israel, and Vietnam have publicly negotiated with Trump.
Trump said the U.S. is waiting for China to call, but that “It will happen!” In the game of chicken, China thinks it can win too. On Tuesday, Chinese officials vowed to “fight to the end” in the face of Trump’s tariffs.
HOW DID US GET HERE WITH CHINA
Both countries had approximately 20% tariffs on one another as of last month. Trump announced a 34% retaliatory tariff last week for what he said were unfair trade practices, taking up the U.S. tariff to 54%. China responded by raising their tariffs by 34%. Trump then added an additional 50% tariff on top of that, taking the U.S. tariffs on all Chinese goods up to 104%.
In 2024, Americans bought nearly $440 billion of goods from China, making it the U.S.’s second-largest source of imports behind Mexico.
Let’s take a look at the numbers: With the new tariffs, if a toy had been $25 wholesale from China, starting Wednesday, that would now cost $51 before it even hits the shelves — retailers would likely pass that cost on to consumers, meaning the toy that used to sell for $40–$50 might now sell for $80–$100 or more.
WAR OF WORDS
Not everyone in the White House agrees with Trump’s gamble. Tesla CEO and Trump advisor Elon Musk called the president’s trade adviser Peter Navarro “Peter Retarrdo,” “truly a moron” and “dumber than a sack of bricks” on Tuesday, responding to Navarro’s claim that Tesla is merely a car assembler, not a car manufacturer.
Over the weekend, Musk had mocked Navarro’s push for broad tariffs and questioned his credentials, writing, “He isn’t built s—,” which he later deleted. Navarro’s Tesla comments then led to Musk’s latest round of insults.
The White House responded to the public spat saying, “boys will be boys,” but Trump has not directly commented on it. However, he appears to be aligning with Navarro’s trade philosophy over Musk’s.
On Monday, Musk posted a video of economist Milton Friedman promoting free trade by explaining the complex supply chain that leads to building a pencil.
Other Trump allies like billionaire hedge-fund manager Bill Ackman have called for a 90-day before the tariffs take effect to buy time to negotiate with other countries.
India cuts rates as Trump’s tariffs put growth at risk
India’s central bank, the RBI, has cut interest rates as growth tends to slow down in Asia’s third largest economy. The Reserve Bank has cut interest rates by 0.25% amid a spate of downgrades to growth following Donald Trump’s tariff announcements. 
The Reserve Bank of India (RBI) reduced repo rates from 6.25% to 6%, a second cut since February when rates were brought down after nearly five years. The repo rate is the rate at which commercial states owned banks borrow from the federal reserve.
The repo rate is also the level at which the central bank lends to commercial banks, influencing borrowing costs. The RBI also brought down its growth projections for this year from 6.7% to 6.5%. It said India’s gross domestic product (GDP) will grow at 6.5% next year as well.
Crucially, the RBI shifted its monetary policy stance to “accommodative” from “neutral”, which means that the central bank would be more open to cutting rates in the future to stimulate a slowing economy.
“Concerns on trade frictions are coming true” and unsettling the global community, RBI governor Sanjay Malhotra said in his speech, adding that headwinds from disruptions to trade would continue to pose challenges for the economy.
Most economists who had previously expected only one more rate cut this year are now predicting more softening as Trump’s tariff war puts growth in the world’s fastest growing major economy at risk.
“The magnitude of rate cuts in the cycle now could be as high as 100bps (1%),” ICICI Bank said in a note, a view echoed by many other analysts.
Moderating inflation will give the RBI further elbow room to slash borrowing costs, according to several brokerages, as growth momentum further loses steam due to Trump’s global trade war.
HSBC calculates GDP could take a direct hit of as much as half a percent this financial year due to slower export volumes around the world and weaker inflows of foreign funds. The government’s capacity to stimulate the economy to counter the impact of Trump’s tariffs is also limited because “spending and tax revenues have lost steam in recent months”, according to HSBC. Starting Wednesday, Indian goods being exported to the US will face additional tariffs of up to 27%. Tariffs on India are lower than 104% on China and 46% and 49% respectively on Vietnam and Cambodia.
HHow will India navigate a world on the brink of a trade war? 
The final impact on India’s trade will depend on “how long the announced tariff structure lasts”, ratings agency Crisil said. “The outcome will also be influenced by how other countries retaliate or negotiate with the US on tariffs.”
China has already retaliated by imposing 34% reciprocal tariffs on US imports, while Europe is considering countermeasures.
The final impact on India’s trade will depend on “how long the announced tariff structure lasts”, ratings agency Crisil said. “The outcome will also be influenced by how other countries retaliate or negotiate with the US on tariffs.”
China has already retaliated by imposing 84% reciprocal tariffs on US imports, while Europe is considering countermeasures.
But even with a trade deal in place, India’s economy is unlikely to be immune to a slowdown in other parts of the world with demand for its exports potentially reducing in the event of global growth falling off a cliff.
Wall Street bank JP Morgan has put the chance of a global recession at 60%, while ratings agency Moody’s said the odds had risen from 15% to 35% due to tariffs.
At the self claimed growth of 6.5%, by India appears to remain the world’s fastest growing major economy, but its growth has sharply come off the 9.2% high recorded in financial year 2023-24.
As Trump hikes tariffs again, nervous businesses weigh what comes next
Watch: Trump says tariffs will be ‘legendary’ ahead of 104% tax on China
US President Donald Trump is ripping up the rulebook on trade that has been in place for more than 50 years, BBC said in a report from New York adding His latest round of sweeping tariffs, which came into force shortly after midnight on Wednesday, hits goods from some of America’s biggest trading partners including China and the European Union with dramatic hikes in import duties.
The president and his allies say the measures are necessary to restore America’s manufacturing base, which they view as essential to national security. But it remains a potentially seismic action, affecting more than $2 trillion worth of imports, which will push the overall effective tariff rate in the US to the highest level in more than a century.
In the US, key consumer goods could see huge price rises, including an estimated 33% for clothing, and analysts are warning of near-certain global economic damage as sales in America drop, trade shrinks and production abroad falls.
With the stock market reeling and political pressure in the US starting to build, the White House has worked to soothe nerves by floating the possibility of trade talks, touting conversations that have already begun with Japan, Vietnam and South Korea.
But Trump has signalled resistance to the kinds of exemptions he granted during his first term, and even if these talks are ultimately productive, country-by-country deal-making will no doubt take time.
“The primary question… is whether or not there will be negotiations,” said Thierry Wizman, a global strategist at the investment bank Macquarie. “And no one has an answer to that because it’s going to depend on the approach and the disposition of the negotiating parties.” The US is set on a collision course with China, which was its third biggest supplier of imports last year primarily manufacturing materials such as steel and alumina.The White House said on Tuesday that it was moving ahead with Trump’s social media threat to add a further 50% levy on imports from China, on top of the 54% duties that had already been announced, unless Beijing agreed to withdraw its retaliation.
Liu Pengyu, a spokesman for the Chinese embassy in Washington, declined to say if the two sides had spoken directly since the threat. But publicly, China has shown little willingness to back down, describing Trump’s moves as “bullying” and warning that “intimidation, threat and blackmail are not the right way to engage with China”.
“If the US decides not to care about the interests of the US itself, China and the rest of the world, and is determined to fight a tariff and trade war, China’s response will continue to the end,” he said in a statement.
Watch: How Beijing is responding to Trump’s tariff hike
The rapid change has shaken US businesses with decades of ties to China, which now find themselves paralysed and unsure how this escalating trade fight might end.
“You would laugh if you weren’t crying,” told US businessman Jay Foreman, whose toy company Basic Fun! is known for classics such as Tonka Trucks and Care Bears, the vast majority of which are made in China. He put out notice to his suppliers to halt any shipments to the US earlier this week, as the US announced it would hit goods from China with duties starting at 104%.
“We just have to hold our shipments until this thing gets sorted out,” he said. “And if it doesn’t get sorted out, then I’m going to sell down the inventory that I have in my warehouse and pray.”
Speaking to Congress on Tuesday, Jamieson Greer, who leads the office of the US Trade Representative, declined to set a timeline for how quickly talks might progress. “The president is fixed in his purpose. This trade deficit and off shoring and the loss of jobs has persisted for too long,” he said, while acknowledging the measures might lead to a “challenging” economic adjustment.
“It is a moment of drastic, overdue change, but I am confident the American people will rise to the occasion as they have done before,” he said.
Shares in the US resumed their downward slide on Tuesday, giving up early gains spurred by Trump comments about trade talks that the fight might see a quick resolution.
The S&P 500 is now trading at its lowest level in more than a year, after seeing roughly 12% of its value wiped out since the announcement last Wednesday.
Stock markets from Japan to Germany have also been shaken, as investors assess the wider repercussions of the actions. In the UK, the FTSE 100 has dropped about 10%.
“What I’m really seeing is trepidation, uncertainty, a lot of questions, a lot of people wanting us to predict what will happen next,” said Amy Magnus, director of compliance and customs affairs for Deringer, a Vermont-based firm that is one of America’s top five customs brokers. “But I have entered into a world that I cannot predict.”
Erin Williamson, vice-president of US customs brokerage at GEODIS, a global supply chain operator, said on Tuesday afternoon, said that the uncertainty had prompted some of her firm’s clients to simply put shipments on pause.
“One of the top ways that you can confirm that you’re not putting your business at risk is really holding off until maybe the dust settles,” she said
The uncertainty is raising the risks to the economy, said Ernie Tedeschi, director of economics of the Budget Lab at Yale, which is not predicting a recession in the US, but still expects tariffs announced so far this year will cost the US 600,000 jobs and lead to a roughly $3,800 hit to purchasing power for the average household.
“A lot of the market turmoil we’ve seen is not about the substance of the economic damage of tariffs on their own. A lot of it is about the uncertainty,” he said. “Businesses and consumers don’t know what the tariff rate is going to be an hour from now… How can you invest or make plans for the future in
that environment?”
Mr Tedeschi said he saw no clear end to the trade war in sight. “Even if the administration wanted to step back, how does it save face in a way that is mutually acceptable to all the relevant players?” he said. “That’s becoming harder by the day.”
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