Beijing on Friday increased its tariffs on US imports to 125 per cent, hitting back against US President Donald Trump's decision to hike duties on Chinese goods to 145 per cent and raising the stakes in a trade war that threatens to upend global supply chains.
Meanwhile, the turmoil unleashed by Trump's tariffs showed few signs of easing, with markets tumbling and foreign leaders puzzling how to respond to the biggest disruption to the world trade order in decades.
A brief reprieve for battered stocks seen after Trump quickly dissipated, as attention returned to his escalating trade war with China that has fuelled global recession fears.
Global stocks fell, the dollar slid and a sell-off in US government bonds picked up pace on Friday, reigniting fears of fragility in the world's biggest bond market. Gold, a safe haven for investors in times of crisis, scaled a record high.
"Recession risk is much, much higher now than it was a couple weeks ago," said Adam Hetts, global head of multi-asset at investment company Janus Henderson.
US treasury secretary Scott Bessent tried to assuage sceptics by telling a cabinet meeting that more than 75 countries wanted to start trade negotiations. Trump himself expressed hope of a deal with China, the world's No.2 economy by nominal GDP, but the world's No.1 in terms of purchasing power parity.
But the uncertainty in the meantime extended .
Asian indices mostly followed Wall Street lower on Friday. In Europe, China's latest tariff hike sent stocks lower, leaving the STOXX 600 index down more than 1 per cent on the day and set for another drop this week, one of its most volatile on record.
Bessent shrugged off the renewed market turmoil on Thursday and said striking deals with other countries would bring certainty.
The US and Vietnam have agreed to begin formal trade talks, the White House said. The Southeast Asian manufacturing hub is prepared to crack down on Chinese goods being shipped to the United States via its territory in the hope of avoiding tariffs, Reuters news agency reported.
Japanese Prime Minister Shigeru Ishiba, meanwhile, has set up a trade task force that hopes to visit Washington next week.
Could there be a 'China deal'?
As Trump suddenly paused his "reciprocal" tariffs on other countries hours after they came into effect earlier this week, he ratcheted up duties on Chinese imports as punishment for Beijing's initial move to retaliate.
He has now imposed new tariffs on Chinese goods of 145 per cent since taking office, a White House official said.
China hit back with new tariffs on Friday.
"The US imposition of abnormally high tariffs on China seriously violates international and economic trade rules, basic economic laws and common sense and is completely unilateral bullying and coercion," China's finance ministry said in a statement.
Beijing also dismissed Trump's mounting brinkmanship as a "joke" and a "numbers game".
"The United States' imposition of round upon round of abnormally high tariffs on China has become a numbers game with no practical significance in economics," the ministry said.
"If the US continues to play the tariff numbers game, China will ignore it," a spokesperson said.
Trump told reporters at the White House on Thursday that he thought the United States could make a deal with China and said he respected Chinese President Xi Jinping.
"In a true sense he's been a friend of mine for a long period of time, and I think that we'll end up working out something that's very good for both countries," he said.
Xi, in his first public remarks on Trump's tariffs, told Spanish Prime Minister Pedro Sanchez during a meeting in Beijing on Friday that China and the European Union should "jointly oppose unilateral acts of bullying," China's state news agency Xinhua reported.
"There are no winners in a trade war," the Chinese leader told his guest, adding that by acting together, the world's second-largest economy and the 27-strong European trade bloc could help uphold "the global rules-based order".
European authorities estimate the impact of the US tariffs on the region's economy would total 0.5 per cent to 1.0 per cent of GDP. Given the EU economy as a whole is forecast to grow 0.9 per cent this year, according to the European Central Bank, the US tariffs could tip the EU into recession.
Trump's decision for a 90-day suspension on tariffs gave room for only a "fragile pause", French President Emmanuel Macron said, partly because tariffs on steel, aluminium and cars remained, as well as across-the-board 10 per cent duties.
Fragile, also, "because this 90-day pause means 90 days of uncertainty for all our businesses, on both sides of the Atlantic and beyond," Macron said on X.
