China hits back at Trump tariffs as markets plunge

China hit back hard against Donald Trump's "bullying" tariffs yesterday, raising fears that the escalating trade war could trigger a global recession and sparking fresh turmoil in financial markets.

- Heather Stewart Amy Hawkins

Beijing retaliated with a punitive 34% additional tariffs on all goods imported from the US - mirroring the US decision and exacerbating a sell-off on global stock markets.

Almost $5tn has been wiped off the value of global stock markets since Trump's rose garden address on Wednesday evening, analysts calculated. In the UK, the FTSE 100 index of leading shares closed more than 7% lower than on Monday - its worst week's trading since late February 2020, when anxiety about the Covid-19 pandemic was gripping the markets.

The dramatic escalation in trade hostilities between the world's two largest economies magnified concerns among investors about the risks to global growth.

The chair of the US central bank, Jerome Powell, warned the trade war would mean "higher inflation and slower growth", as he resisted Trump's calls to cut interest rates.

The International Monetary Fund (IMF) also warned the escalating trade war was likely to hit global economic growth. The tariffs "clearly represent a significant risk to the global outlook at a time of sluggish growth", said the IMF's managing director, Kristalina Georgieva.

Beijing's retaliation came after Trump imposed 34% tariffs on Chinese goods, which were already subject to a 20% levy, taking the total tariff to 54%.

He also imposed hefty tariffs on neighbouring countries in south-east Asia including Vietnam, Cambodia and Thailand, through which billions of dollars of Chinese exports are processed on their way to the US.