President Donald Trump’s new round of “reciprocal” tariffs, including a sweeping 104% duty on Chinese goods, is scheduled to take effect on Wednesday, escalating the ongoing global trade war. This move is poised to deepen economic tensions as Trump prepares for trade negotiations with several nations.
The introduction of these tariffs has rattled the global trading system, which has been in place for decades, leading to concerns of a potential recession and causing stock markets worldwide to plummet. On Tuesday, the S&P 500 index closed below 5,000 for the first time in nearly a year and is edging closer to a bear market, typically defined as a 20% drop from its recent high.
Since Trump announced the tariffs last Wednesday, the S&P 500 has seen a loss of $5.8 trillion in market value—marking the steepest four-day decline since the benchmark’s creation in the 1950s, according to data from LSEG. As a result, Asian markets resumed a sell-off on Wednesday, with Japan’s Nikkei falling more than 3% and the South Korean won hitting a 16-year low. U.S. stock futures also pointed to further losses on Wall Street, signaling a fifth consecutive day of declines.
Trump has sent mixed signals regarding the long-term nature of the tariffs. While he has called them “permanent,” he also suggested that the pressure they are putting on other world leaders has opened the door for negotiations. “We have a lot of countries coming in that want to make deals,” Trump said during a White House event on Tuesday. He also indicated that he expects China to pursue an agreement soon.
The Trump administration has scheduled talks with key allies, including South Korea and Japan, as well as an upcoming visit from Italian Prime Minister Giorgia Meloni. The prospect of such negotiations led to a brief rally in stock markets earlier on Tuesday, although U.S. stocks ultimately lost their gains by the close of trading.
In response to China’s counter-tariffs, Trump nearly doubled duties on Chinese imports, raising them from 54% to 104%. China has vowed to retaliate, viewing the tariffs as an act of economic coercion. Economists have warned that the U.S. consumer market could face rising prices on a variety of goods, including sneakers, electronics, and wine, as a result of the tariffs.
The full impact of the new tariffs may take some time to be felt, as goods already in transit before midnight on Wednesday will be exempt from the new duties, provided they arrive in the U.S. by May 27. However, a Reuters/Ipsos poll found that nearly three-quarters of Americans expect the prices of everyday items to increase over the next six months.
The latest round of tariffs follows a 10% duty on imports from several countries that went into effect on Saturday. These tariffs target nations Trump claims are “ripping off” the U.S., including some of its closest allies. The European Union faces a 20% tariff, while Vietnam, which benefited from the shift of U.S. supply chains away from China, faces a 46% tariff.
Trump has argued that the tariffs are necessary to address trade barriers that have hindered American businesses. He has also accused countries like Japan of manipulating their currencies to gain an unfair trade advantage—a claim that Japan denies. On Wednesday, Japan’s finance minister said that currency exchange rates could be a topic of discussion in upcoming trade talks with Washington.
Trump also indicated that his tariff agenda may not be complete. During remarks to Republican lawmakers on Tuesday, he teased the announcement of “major” tariffs on pharmaceutical imports, signaling that more industries may soon be affected by his protectionist policies.
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