Stocks resume slump as Trump threatens China with additional tariffs of 50% this week

 

Stocks Resume Slump as Trump Threatens China with Additional Tariffs of 50% This Week

By Steven Orlowski, CFP, CNPR
Date: April 7, 2025

Wall Street stumbled on Monday morning as markets reacted sharply to former President Donald Trump’s latest escalation in trade rhetoric, threatening to impose an additional 50% tariff on Chinese imports later this week if Beijing does not, in his words, “come to the table with real concessions.”

The Dow Jones Industrial Average fell over 500 points in early trading, while the S&P 500 and Nasdaq dropped 1.4% and 2.1%, respectively. The sell-off marked a renewed bout of investor anxiety over the fragile state of U.S.-China trade relations, reigniting memories of the tariff wars that rattled markets during Trump’s first term.

In a post on Truth Social late Sunday, Trump accused China of “manipulating trade, stealing American technology, and flooding our markets with cheap, unfair products,” vowing swift retaliation if the Chinese government failed to meet his demands. “We gave them a chance,” Trump wrote. “Now it’s time to take action that puts AMERICA FIRST.”

Markets had been on edge for weeks as Trump, the presumptive Republican nominee for the 2024 presidential election, ramped up his tough-on-China rhetoric during campaign stops. However, the explicit threat of a 50% tariff increase — far beyond current levels — caught many investors off guard.

Economic Jitters

Economists and market analysts were quick to warn that additional tariffs could have wide-ranging consequences. “A 50% tariff on Chinese goods would effectively launch a full-scale trade war,” said Dana Keller, chief economist at Global Insight Partners. “It would raise prices for American consumers, disrupt supply chains, and threaten the fragile post-pandemic recovery.”

Retail and technology sectors led the market decline, with companies like Apple, Walmart, and Nike seeing share prices drop by as much as 3% amid fears of higher input costs and reduced access to Chinese manufacturing. Semiconductor stocks also fell sharply, with Nvidia and AMD both down more than 4%.

The U.S. Chamber of Commerce issued a rare rebuke, warning that such tariffs “would be deeply damaging to American businesses and consumers alike.”

China Responds Cautiously

Chinese officials have not yet issued a formal response, but state-run media urged “calm and restraint,” signaling that Beijing may be weighing its options carefully. Analysts say a tit-for-tat escalation remains a strong possibility if Trump’s threat materializes.

“China has always preferred diplomacy, but it is prepared to defend its interests,” said Dr. Liu Meiyu, a trade expert at the University of Hong Kong. “If the U.S. acts unilaterally, expect countermeasures.”

The current U.S.-China trade agreement, brokered in part during Trump’s presidency, remains in a tenuous state, with both sides accusing the other of violations. The Biden administration has maintained some tariffs while exploring diplomatic alternatives, but Trump’s return to the spotlight appears to be upending that approach.

Political Stakes Rising

With the 2024 general election just months away, Trump’s aggressive posture on China is viewed by many as a strategic move to energize his base. Polls show that a tough stance on Beijing remains popular among Republican voters, especially in key battleground states.

Still, the economic fallout from renewed trade tensions could complicate Trump’s message. “There’s a fine line between sounding tough and triggering a recession,” said Alex Navarro, senior strategist at Capitol Advisers. “Markets are signaling real concern.”

As Wall Street braces for further volatility, all eyes will be on Trump’s next move — and whether China decides to de-escalate or retaliate in kind.