By Liz Lee and Jeff Mason
BEIJING/WASHINGTON (Reuters) – The ongoing turmoil spurred by U.S. President Donald Trump’s tariffs showed no signs of abating on Friday, with markets once again plummeting and foreign leaders grappling with how to navigate a potential unraveling of the global trade system.
Following a week of market turbulence, Trump’s decision to temporarily halt tariffs on numerous countries for 90 days offered a brief respite on Wednesday. However, his intensifying trade dispute with China, the world’s second-largest economy, has stoked concerns of an economic downturn and further retaliatory actions.
Amid the uncertainty, U.S. Treasury Secretary Scott Bessent sought to reassure skeptics during a cabinet meeting on Thursday by noting that over 75 countries were interested in initiating trade discussions. Trump himself expressed optimism about reaching a deal with China.
Nonetheless, the prevailing uncertainty fueled some of the most volatile trading activity since the early stages of the COVID-19 pandemic. The S&P 500 index closed 3.5% lower on Thursday, marking a total decline of approximately 15% from its peak in February. Analysts anticipate further market declines due to the ambiguity surrounding U.S. tariff policies.
Following suit, Asian markets mirrored the downward trend on Friday, with Japan’s Nikkei plummeting nearly 5% and Hong Kong stocks poised for their most substantial weekly drop since 2008. Oil prices are also expected to decline for a second consecutive week.
Despite the renewed market downturn, Bessent remained unfazed and projected that securing trade agreements with other nations would bring about greater certainty. Notably, the U.S. and Vietnam agreed to commence formal trade negotiations, as confirmed by the White House following a conversation between Bessent and Vietnamese Deputy Prime Minister Ho Duc Phoc.
Japanese Prime Minister Shigeru Ishiba established a task force to spearhead trade discussions, with plans to visit Washington in the upcoming week, as reported by local media.
Trump’s tariff suspension excluded China, as he escalated tariffs on Chinese imports to an effective rate of 145% in response to Beijing’s retaliatory measures. Chinese officials have been engaging with other trading partners, including Spain, Saudi Arabia, and South Africa, to navigate the impact of U.S. tariffs.
Trump expressed optimism about reaching a favorable resolution with China, emphasizing his respect for Chinese President Xi Jinping. However, he reiterated longstanding concerns about China’s trade practices.
In response, China rebuffed what it viewed as threats and coercion from Washington, vowing to stand firm against any persistence of U.S. actions. While China emphasized its openness to dialogue, it stressed the importance of mutual respect in any negotiations.
Additionally, Beijing imposed restrictions on imports of Hollywood films, targeting a prominent American export. The U.S. tariff pause did not extend to Canada and Mexico, whose goods remain subject to 25% fentanyl-related tariffs unless they conform to the rules outlined in the U.S.-Mexico-Canada trade agreement
Recent data from Yale University researchers indicates that adjustments to certain tariffs have had minimal impact on reducing the overall average import duty rate. The average effective tariff rate has reached its highest level in over a century, as reported by the Yale Budget Lab. Amidst ongoing global trade tensions, a brief respite occurred when the European Union announced a temporary halt to implementing retaliatory tariffs. European Commission President Ursula von der Leyen expressed a desire to prioritize negotiations in hopes of reaching a satisfactory resolution, while cautioning that counter-tariffs could be reimposed if necessary. The EU had planned to impose counter-tariffs on approximately 21 billion euros ($23 billion) worth of U.S. imports in response to the U.S.’s steel and aluminum tariffs. In addition, the EU is evaluating how to address U.S. automobile tariffs and other existing levies. Despite President Trump’s assertion that the U.S. was generating $2 billion daily from tariffs, recent Treasury data paints a different picture. Customs duties in March totaled $8.75 billion, showing an increase of around $2 billion compared to the previous year, largely attributed to tariff hikes implemented by Trump earlier this year.(Source: Reuters; Reporting by Reuters newsrooms; Writing by John Geddie; Editing by Lincoln Feast)
