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The Trump administration is doubling down on its trade fight with China, announcing a sharp increase in tariffs that now amount to 145% on Chinese imports. The latest move, clarified by the White House on Thursday, adds a new 125% tariff on top of an earlier 20% hike introduced in February. These aggressive levies mark one of the boldest steps yet in the ongoing U.S.-China trade war.
China, the U.S.’s third-largest trading partner, is now facing far steeper tariffs than even close neighbors Mexico and Canada, who are currently hit with controversial 25% tariffs.
Markets React Sharply as Investors Grow Nervous
Wall Street responded with alarm. The three major stock indexes plunged again Thursday, capping a tumultuous week. The Nasdaq dropped 4.31%, the S&P 500 fell 3.46%, and the Dow Jones Industrial Average slid 2.50%—wiping out most of the previous day’s historic gains.
“The current situation is not only chaotic, it’s crazy,” said Carsten Brzeski, an economist with ING. “Don’t forget that we have been here before with announcements and then we get some pauses, only for the originally announced tariff to be reintroduced again.”
Just a day earlier, markets had rallied after President Donald Trump temporarily paused tariffs on a number of countries that had not retaliated. That pause triggered one of the biggest single-day market surges in decades. But the optimism quickly faded as fears of a prolonged and unpredictable trade conflict with China resurfaced.
Trump Defends Strategy: “They’ve Ripped Us Off”
Speaking during a Cabinet meeting, Trump remained firm on his position with China. “We’ll see what happens with China,” he said. “We would love to be able to work a deal. They’ve really taken advantage of our country for a long period of time. They’ve ripped us off beyond anybody.”
National Economic Council Director Kevin Hassett claimed the administration is making progress elsewhere, saying nearly 20 nations have submitted “serious” offers for new trade agreements. He also mentioned that two deals were “almost closed.”
Hassett said a 10% universal baseline tariff would likely remain in place for most countries, forming the foundation for new agreements going forward.
China Strikes Back, Tensions Deepen
China didn’t take the new tariff hike lightly. Beijing responded swiftly with an 84% tariff on U.S. goods that went into effect Thursday, signaling a deepening rift between the world’s two largest economies.
“The trade war is now turning into a direct confrontation between the U.S. and China,” noted analysts at Rabobank. “We could again be seeing escalation and de-escalation at the same time, pulling markets in different directions.”
When asked if Chinese President Xi Jinping had contacted the U.S. recently to discuss trade, Trump remained vague. “I don’t want to say who’s reached out,” he said. “I’ll just say that I think it’s going to work out, hopefully.”
Trump Threatens Mexico Over Water Dispute
While relations with Mexican President Claudia Sheinbaum have remained cordial despite existing 25% tariffs on Mexican goods, Trump stirred new tensions Thursday. He accused Mexico of violating a decades-old water treaty and threatened further tariffs or even sanctions if the issue isn’t resolved.
“We will keep escalating consequences,” Trump posted on his social media site, “including TARIFFS and, maybe even SANCTIONS, until Mexico honors the Treaty, and GIVES TEXAS THE WATER THEY ARE OWED!”
The treaty in question dates back to 1944 and requires Mexico to send 1.75 million acre-feet of water to the U.S. every five years. According to the International Boundary and Water Commission, Mexico has delivered less than 30% of that amount as the current cycle nears its end this October.
Mexico argues that extreme drought conditions, worsened by climate change, make it impossible to meet the obligation. The treaty does allow for flexibility in such cases, letting water deficits carry over to the next cycle.
Democrats Raise Ethics Concerns Over Timing
Some Democrats have questioned the timing of Trump’s tariff announcements. Just hours before he paused some tariffs on Wednesday, Trump posted online: “THIS IS A GREAT TIME TO BUY!!! DJT.” That message was followed by a market surge that notably boosted Tesla’s stock—an 18% jump—amid speculation about favorable treatment. Tesla is partly owned by Trump ally Elon Musk.
Senators Adam Schiff of California and Ruben Gallego of Arizona wrote a letter expressing “grave legal and ethics concerns,” warning that such posts could give the president’s inner circle an unfair advantage in the stock market.
“The president, his family, and his advisors are uniquely positioned to be privy and take advantage of non-public information to inform their investment decisions,” they wrote.
At Thursday’s Cabinet meeting, Trump shrugged off the criticism, and the White House denied any wrongdoing.
Impact on American Consumers and Businesses
Economists warn that the back-and-forth tariff battle could hit American consumers hard. Mark Zandi, chief economist at Moody’s Analytics, said the pause on some tariffs is unlikely to slow rising prices for essential goods.
“There will be more bad days in the stock market and a massive increase in prices,” Zandi said. “Everything from clothing to cars to cellphones will become more expensive.”
China, which provides over 16% of all U.S. imports, is a key supplier of consumer products. Bloomberg economist Anna Wong echoed those concerns, posting on X that “China exports more consumer goods to the U.S. than other countries, so boosting [tariffs] will boost the hit to consumption goods.”
White House Dismisses Market Jitters
Despite Thursday’s market drop, the administration tried to downplay the significance of the losses.
“Up two, down one is not a bad ratio, or up 10, down five,” said Treasury Secretary Scott Bessent. He emphasized other economic indicators, such as improved inflation data and a strong bond market, as signs of stability.
Trump added: “There’ll be a transition cost and transition problems, but in the end, it’s going to be a beautiful thing.”
What’s Next?
With over 75 countries now in trade talks with the U.S., Trump said that if deals don’t come together, the tariffs will return.
“If we can’t make the deal that we want to make, or we have to make, or that’s good for both parties—it’s got to be good for both parties—then we go back to where we were,” he said.
The next three months will be crucial, both for the global economy and the American consumer, as the world watches whether Trump’s high-stakes tariff gamble will pay off—or backfire.
