U.S. Slaps 245% Tariffs on China as Trade War Reignites: Markets Rattle on Policy Shock

The U.S. has sharply escalated its economic confrontation with China, raising tariffs on a wide array of Chinese imports to as high as 245%. The move, announced by the Trump administration, is part of a sweeping effort to “correct structural imbalances” and tighten national security controls. The tariff package bundles multiple trade measures—including new Section 301 duties, fentanyl-linked enforcement actions, and the suspension of de minimis exemptions for Chinese e-commerce shipments.

The increase marks the most aggressive single tariff hike in the modern history of U.S.-China trade relations and has triggered immediate market fallout.

Markets Slide as Investors Reprice Trade Risk

U.S. equities opened sharply lower following the announcement. The S&P 500 dropped nearly 3% intraday before paring losses, while tech-heavy indices such as the Nasdaq bore the brunt of the selloff. Semiconductors, cloud infrastructure, and consumer electronics—sectors deeply tied to China’s supply chain—led the decline. Apple, Qualcomm, and Nvidia all posted steep losses amid concerns over component costs and demand exposure.

Bond markets showed signs of strain, with safe-haven flows briefly boosting Treasuries before yields rebounded on inflationary fears. The CBOE Volatility Index (VIX) jumped past 21, its highest level in two months.

Meanwhile, the U.S. dollar came under pressure. A fresh survey from Bank of America Global Research showed the highest level of bearish sentiment toward the greenback in over 15 years, with investors citing long-term damage to America’s export competitiveness and fiscal credibility.

Global Trade Feels the Shock

Beyond U.S. markets, global trade sentiment weakened. The World Trade Organization revised its forecast for U.S.-China merchandise trade flows in 2025 downward by nearly 80%, citing tariff and non-tariff frictions. Supply chains are bracing for another wave of disruption, especially in key sectors like consumer goods, industrial machinery, and pharmaceuticals.

China has yet to fully unveil its countermeasures, but officials in Beijing called the move "economic coercion" and hinted at potential export restrictions on rare earths and critical electronics. The escalating rhetoric has revived fears of a prolonged economic decoupling between the world’s two largest economies.

Tips for Traders

• Watch for Retaliation Headlines: Chinese countermeasures could come swiftly. Position accordingly in Asian equities, commodity-linked FX, and U.S. tech.

• Reassess Supply Chain Exposure: Companies with high China exposure may face margin pressure. Look for downside in retail, consumer electronics, and hardware.

• Monitor Currency Volatility: Tariff-driven weakness in the USD or CNY could create tactical trading windows. Stay nimble on FX crosses.

• Look to Safe Havens: Treasuries and gold remain volatility hedges—but timing is key. Watch for overbought conditions after flight-to-safety spikes.

• Explore Rotations: Domestic infrastructure, defense, and commodity-related names may benefit from protectionist sentiment and increased federal spending.