Washington: In a sharp escalation of the ongoing trade war, US President Donald Trump on Wednesday increased tariffs on Chinese imports to 125 percent, just hours after China imposed an 84 percent tax on American goods and pledged to "fight to the end" against economic pressure.

The moves mark a significant intensification of tensions between the world’s two largest economies, as they continue to exchange economic blows. The trade conflict now threatens to disrupt global supply chains and drive up consumer prices.

China retaliates and targets US firms

Beijing’s new tariff rate came in direct response to Trump’s earlier decision to hike duties on Chinese goods to 104 percent—a move that affected multiple global trading partners. In turn, Europe and Canada introduced their own tariffs on U.S. products on Wednesday.

Citing a “lack of respect,” Trump countered by raising the Chinese tariff further to 125 percent while granting a temporary 90-day pause on tariffs for most other countries.

"Based on the lack of respect that China has shown to the World's Markets, I am hereby raising the Tariff charged to China by the United States of America to 125 percent, effective immediately," he wrote.

"Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorised a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10 percent, also effective immediately," Trump added.

The Chinese Ministry of Commerce responded forcefully: “If the US insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end.”

Beijing also imposed restrictions on nearly a dozen US companies, banning Chinese firms from selling them dual-use items with military applications. Among those listed were American Photonics and SYNEXXUS, both known to supply the US military.

Global Markets and Supply Chains at Risk

The current trade dispute poses major risks for global businesses. The European Chamber of Commerce in China accused the US of undermining core trade principles and warned that the tariffs would force European companies operating in China to reevaluate their strategies.

“This will lead to a substantial increase in operational costs and inefficiencies, and ultimately higher prices for consumers,” the chamber said.

Former US trade official Wendy Cutler noted that while both sides may want to return to talks, “this won’t be an easy path to navigate with both countries doubling down and bilateral engagement at a virtual standstill.”

China has taken the dispute beyond tariffs. The Ministry of Culture and Tourism issued a travel warning for citizens considering visits to the United States, citing “the safety situation” and deteriorating trade ties.

At the World Trade Organization, China launched a new challenge against the American tariffs, claiming violations of past trade commitments. A position paper released by China on Wednesday accused the U.S. of breaching promises made in the previous “Phase One” agreement, particularly citing the US legislation that may ban TikTok unless it is sold by its Chinese parent company, ByteDance.

Rising tariff timeline and impacts

Trump has now raised tariffs on Chinese products five times since taking office. Initial increases of 10 percent were met with restrained responses from Beijing. However, when Trump recently introduced a 34 percent hike, branding it as “Liberation Day,” China replied with an equivalent tariff.

Following that, Trump imposed another 50 percent duty and declared trade negotiations with China over. The combined effect brought total US tariffs on Chinese goods to 104 percent. In response, China raised its own tariffs to 84 percent.

In its latest statement, China’s Commerce Ministry warned: “History and facts have proven that the United States’ increase in tariffs will not solve its own problems. Instead, it will trigger sharp fluctuations in financial markets, push up US inflation pressure, weaken the U.S. industrial base and increase the risk of a US economic recession, which will ultimately only backfire on itself.”

Trade imbalance remains significant

Despite rising tensions, economic ties between the two nations remain strong. According to the US Commerce Department, American exports to China reached a record $199 billion last year. Meanwhile, China sent $463 billion worth of goods and services to the US, ranking third after Mexico and Canada.

Although China was once the top supplier of US imports, its share has declined in recent years as Washington seeks to rely more on its regional neighbours.

Agency inputs