China announced it would push back against Donald Trump’s newest tariff threats and took steps to shore up its markets. Fears of a prolonged trade war are now at an all time high.

In a statement on Tuesday, the Chinese Ministry of Commerce slammed Washington’s plan to impose additional tariffs as “a mistake on top of a mistake.” The statement further added, “If the US insists on its own way, China will fight to the end.” 

This came after Trump vowed to impose an additional 50% import tax on Chinese goods if Beijing did not withdraw its recent retaliatory duties. According to a White House official, the new move would bring total announced tariffs this year to 104%, building on a 34% “reciprocal” increase set for April 9 and a 20% hike introduced earlier.

Authorities in China signaled they will not back down easily. “The rhetoric from China is strong,” commented Michelle Lam, greater China economist at Societe Generale. 

Michelle Lam added, “Without Trump backing down investors may need to prepare for trade decoupling between both countries.” Despite the tension, the Ministry of Commerce left room for discussion, though Trump threatened to halt all talks if Beijing fails to comply.

As the confrontation heated up, Chinese officials turned to market-support measures. They loosened their grip on the yuan to help exporters and directed a group of state-backed funds, known as the national team, to buy up assets. 

China’s onshore yuan slipped to its lowest since September 2023

Reports also suggested that some stimulus might be moved forward to stabilize the economy. Even so, the onshore yuan slipped to its weakest point since September 2023, and the offshore yuan touched a two-month low on Tuesday. A day after logging its worst dive since the financial crisis, the Hang Seng China Enterprises Index surged as much as 2.26%.

Political tensions show no sign of easing. Observers note that Trump, who returned to the White House earlier this year, has not spoken with Chinese President Xi Jinping since taking office again. It marks the longest a US leader has gone without contacting a Chinese counterpart in two decades. Analysts worry that lack of direct engagement could inflame the trade war.

China’s reduced dependence on American demand may blunt the impact of tariffs, yet trade watchers warn that continued escalation could harm both economies. For now, investors worldwide remain on edge, fearing further escalation if neither side backs off from their stance.

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