China’s retaliatory tariffs on US farm goods kick in as trade war escalates
Another front in Donald Trump’s trade wars opened up this morning, as China’s retaliatory tariffs on US imports kicked in.
The tariffs, announced last week, target about $21bn of agricultural imports from the US, in response to the extra 10% tariff imposed on China’s exports to the US by Trump.
Beijing’s move covers a wide range of commodities. Imports of US-grown chicken, wheat, corn and cotton will face an extra 15% tariff, the Chinese ministry said last week. Tariffs on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products will be increased by 10%.
The move will make US products more expensive, and thus less competitive, in the Chinese market, which is likely to lead to more imports from other countries instead.
That is bad news for US farmers, and increases the risks that the US economy slows… or even drops into the dreaded recession.
Key events
Analysts at investment bank Jefferies remain optimistic about the prospects for the US economy in the second half of 2025 – while also fearing that it may slow more than expected in the first half of the year.
In an updated US Economic Outlook, Jefferies tell clients:
Broadly, these changes are modest relative to what we were looking for at the beginning of the year. We started out 2025 expecting growth to slow in the first half due to exactly the sort of tensions and uncertainty about policy that we are currently seeing. It now appears that the slowdown will be a bit more pronounced than we expected, but we remain optimistic about the second half of the year and beyond.
We expect that the labor market will continue to cool gradually in the months ahead, with downside risks due to government spending uncertainty. We continue to expect that the Fed cut rates again in June, followed by 2 more 25 bp cuts, but we’re now expecting they will be back-to-back in July and September (rather than every-other-meeting).
Trade tensions push down European markets
European stock markets have dropped at the start of the new trading week.
All the major indices are in the red, as investors continue to worry about the impact of global trade wars and a possible US recession.
In London, the FTSE 100 index has shed 36 points, or 0.4%, to 8643 points, with mining companies and banks among the fallers.
Germany’s DAX has dropped by almost 1%, and France’s CAC 40 has lost 0.4%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, says:
‘’Unease about the effect of Trump’s tariffs hangs over financial markets at the start of the week. The prospect of a recession in the US is lurking, with consumer confidence falling, companies facing increasing trade complexity and investors turning more nervous. China’s deflation problem is also weighing on sentiment, and geopolitical concerns are staying in focus, with attacks on Ukraine intensifying.
The FTSE 100 is on the back foot in early trade, unable to shake off the nervousness surrounding the concerns about slowing global growth.
Airport strike hits German air travel
There’s travel disruption at German airports today, where a 24-hour strike has led to thousands of flight cancellations in a dispute about workers’ pay.
The strike, called by the Verdi union on Friday, impacts 13 airports across the country, including Munich, Berlin and Dusseldorf.
The operator of Frankfurt airport, Germany‘s busiest, said no passenger flights would depart from there on Monday, with delays and cancellations also possible on Tuesday.
Verdi is demanding an 8% wage increase, or at least an increase of 350 euros ($380) more per month, as well as higher bonuses and additional time off.
Employers have rejected the demands as unaffordable, with negotiations due to continue later this month, Reuters reports.
German exports have tumbled, a sign of the troubles gripping Europe’s largest economy.
Exports from Germany fell by 2.5% in January, new data shows, weaker than the 0.5% rise which economists expected.
This pulled Germany’s trade balance down to 16bn for January, down from 20.7bn in December.
In cheerier news for Berlin, though, industrial production rose by 2.0% month-on-month in January.
This may show that Germany’s industrial downturn is bottoming out, suggests Carsten Brzeski, global head of macro at ING, telling clients:
Today’s data confirms the bottoming out of Germany’s industrial slump. However, it is too early to call any substantial turnaround. Manufacturing capacity utilisation is at lows comparable only to those seen during the financial crisis and the initial lockdowns, order books shrank again in January with particularly weak foreign demand, and inventory levels remain at elevated levels. This still paints a rather unflattering picture of a nation known as an industrial powerhouse.
With looming US tariffs on the EU and the expected modern version of ‘beggar-thy-neighbour’ policies by the new US administration, the short-term outlook for German industry remains anything but rosy. This is not just because of the potential impact on German exports, but more so the effect on German investments if companies were to move production to the US.
Shipping firm Clarksons warns of rising uncertainties
Clarksons, the world’s biggest shipping services provider, has warned this morning that trade tensions and geopolitical conflict is hitting its sector.
Andi Case, chief executive officer of Clarksons, told shareholders that both freight rates and asset values have fallen this year, hitting its financial results in 2025.
Case explains:
For some years now we have started each new financial period with an uncertain geo-political outlook; 2025 has started with more uncertainty than most due to political change, ongoing regional conflicts, increased trade tensions, tariffs and sanctions, inflation and changing monetary policy across global economies.
As I write this report, the impact of these uncertainties is that freight rates and asset values have broadly fallen, which has meant that the value of spot business done to date is less than the same period last year.
Shares in Clarksons have tumbled by over 17% in early trading.
The company also reported record underlying pre-tax profits for 2024, and a 4% rise in earnings per share.
China’s stock markets have dropped today, as the double-whammy of trade war fears and deflation weighed on investors.
The CSI 300 index dropped by 0.4%, while in Hong Kong the Hang Seng index slid by 1.8%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, calls it an “ugly early week selloff in China”, adding:
The week starts on a sharp negative note for the Chinese stocks, as the latest inflation update showed that consumer prices in China fell the most in more than a year….
Overall, the week is expected to bring more tariffs the Chinese tariffs on US agricultural and some Canadian products will start today, while the US steel and aluminium tariffs will be live from Wednesday.
The US-China trade war comes at a time when the Chinese economy is already struggling with weak inflation.
Consumer prices fell in February, pulling the CPI inflation rate down to -0.7% in February, the first negative reading since January 2024.
China’s deflationary pressures are “deepening”, says Stephen Innes, managing partner at SPI Asset Management, adding:
Monday kicks off with the same old deflationary drumbeat as China’s consumer inflation took a deeper dive than expected, slipping below zero for the first time in over a year. The data only reinforces what’s been clear for months—deflationary pressures remain firmly entrenched in the world’s second-largest economy.
The property sector remains stuck in the mud, domestic demand is weak, and despite a bounce in tech stocks, the broader wealth effect just isn’t filtering through to consumers.
China also announced new tariffs against Canada last weekend, creating an early headache for its next prime minister, Mark Carney.
Beijing is bringing in tariffs on over $2.6bn worth of Canadian agricultural and food products, in a retaliation against levies on China-made electric vehicles and steel and aluminium products which Ottawa introduced last October.
The commerce ministry said in a statement.
“Canada’s measures seriously violate World Trade Organization rules, constitute a typical act of protectionism and are discriminatory measures that severely harm China’s legitimate rights and interests.”
China will apply a 100% tariff to just over $1bn of Canadian rapeseed oil, oil cakes and pea imports, and a 25% duty on $1.6bn worth of Canadian aquatic products and pork.
China’s retaliatory tariffs on US farm goods kick in as trade war escalates
Another front in Donald Trump’s trade wars opened up this morning, as China’s retaliatory tariffs on US imports kicked in.
The tariffs, announced last week, target about $21bn of agricultural imports from the US, in response to the extra 10% tariff imposed on China’s exports to the US by Trump.
Beijing’s move covers a wide range of commodities. Imports of US-grown chicken, wheat, corn and cotton will face an extra 15% tariff, the Chinese ministry said last week. Tariffs on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products will be increased by 10%.
The move will make US products more expensive, and thus less competitive, in the Chinese market, which is likely to lead to more imports from other countries instead.
That is bad news for US farmers, and increases the risks that the US economy slows… or even drops into the dreaded recession.
Introduction: Trump does not rule out recession
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
“If it isn’t hurting, it isn’t working,” was the cry of then-UK-chancellor John Major in 1989, as the British government tightened policy to fight inflation and drove the country into a recession.
But it could also be the catchphrase of the new American president, who appears relaxed about concerns he could trigger a US downturn.
Donald Trump has refused to say whether his trade policies means the US economy is facing a recession or higher inflation, arguing that a “period of transition” is taking place.
Instead, he told Fox News show Sunday Morning Futures:
“I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.
And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us.”
The comments echo Trump’s line about how tariffs will cause ‘a little disturbance’, in his State of the Union speech last week.
Trump was speaking to Fox shortly after the latest US jobs report showed a pick-up in the unemployment rate in February, but also a rise in hiring – with payrolls up 151,000 in February.
That jobs data calmed some nerves about a looming “Trumpcession”, but economists remain concerned that slapping tariffs on major trading partners and slashing the Federal government will hurt growth.
Kyle Rodda, senior financial market analyst at Capital.com, says:
US President Trump implied he’s willing to tolerate weaker growth as the economy “transitions”, something that may sour investor sentiment further – with private sector job creation far outstripping modest public sector job creation.
The data added to the notion the US economy is moderating and its performance is converging with the rest of the world. The rates market, responding to increasingly disappointing data and downside surprises in activity, indicate that the Fed ought to re-starting cutting interest rates in July, if not potentially June.
