U.S. Markets Sink as China Hits Back with 34% Tariffs, Intensifying Fears of Global Recession

The global financial markets fell on Friday after China announced 34% reprisal prices on all American products, marking a spectacular escalation in the trade war launched by President Donald Trump.

Beijing’s aggressive response has intensified the fears of an imminent American and global recession, economic analysts warning that sustained prices could push the greatest economy in the world into a slowdown.

Beijing’s shock announcement sent US stock markets in a fall, the industrial average of Dow Jones, falling from more than 800 points at the start of negotiations, reflecting investor anxiety. The Nasdaq Composite slipped by more than 3%, with semiconductor and technological giants, notably Apple, Qualcomm and Nvidia, taking major successes because of their dependence on Chinese supply chains. The S&P 500 lost 2.5%, erasing weekly gains while traders withdrew risked assets.

The American agriculture sector, which has already suffered from previous prices cycles, has seen contracts for corn, soybeans and toppassing wheat while China required immediate suspension of imports of sorghum, poultry and bonaire of American exporters. Asian and European markets have also reacted negatively, the Hang Seng index in Hong Kong dropped by 2.7% and the Nikkei 225 in Japan down 1.9%.

“This is a severe rethink of risks,” said Kristina Hooper, chief strategist of the world market at Investco. “The markets had hope for de -escalation, but these last prices clearly indicate that the trade war is only worse.”

The escalation of the trade war has put the world economy on fragile ground, the economists warning that continuous reprisals of the affected nations could trigger a full -fledged recession. On Friday, Mohamed El-Erian, chief economic advisor of Allianz, warned that the vast raft of prices “puts the American economy in danger” of a slowdown. Speaking at the Ambrosetti forum in Cernobbio, Italy, El-Erian told CNBC that the probability of an American recession had increased to 50% due to the growing impact of commercial restrictions.

He added that inflation expectations increased to 3.5%, aggravating economic risks. Although he did not believe that an American recession was inevitable, he warned that the risk had become uncomfortably high.

Many analysts have argued that the aggressive use of prices by Trump, in particular against China, could turn against American companies and consumers by increasing costs and reducing business benefits. The electronics and automotive manufacturing sectors, consumption are particularly vulnerable, because higher import costs will inevitably be transmitted to consumers, exacerbating inflation.

Beijing’s countermeasures go beyond the prices, China imposing new export controls on rare earth minerals, an essential element of the production of semiconductors, electric vehicles and military equipment. The Chinese government has announced that it would limit exports of rare and heavy land, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium – all essential to American defense and technology industries.

“The objective of implementation by the Chinese government of export controls on the relevant elements in accordance with the law is to better protect national security and interest, and to fulfill international obligations such as non-proliferation,” said the Ministry of Commerce in a press release.

Export controls will take effect on April 4, constituting a direct threat to American manufacturers and defense entrepreneurs who are on these materials.

In addition, China has put 16 American companies on black list by adding them to its export control list, prohibiting the sale of dual -use articles (civil and military) to these companies. 11 Other American companies, including Skydio Inc. drone manufacturers and Drones Brinc, have been added to the list of “unreliable entities” of China, restoring their ability to invest or operate in China. The Chinese Ministry of Commerce has justified the measures by accusing targeted companies of “seriously undermined national sovereignty, the interests of security and development”.

American business leaders have raised fears that the tariff war has negative long -term consequences for the economy, even if China ends up giving in to American demands. The US Chamber of Commerce has warned that American manufacturers would suffer the most, as supply chains are becoming more expensive and that production costs are increasing.

Tesla and General Motors, both unraveling Chinese batteries and components, have already pointed out that other prices may force them to increase the prices of electric vehicles.

Despite growing concerns on the part of economists and business leaders, Trump remains provocative, insisting that his pricing strategy is necessary to force China to fair trade practices. Speaking during a rally in Scran, Pennsylvania, Trump rejected the concerns of an economic slowdown saying that “my policies will never change.” And that “America will no longer be benefited from”.

Its administration has indicated that more prices could be on its way if China continues to retaliate, which makes it fear a prolonged dead end which could more vibrate the world markets.

None of the two parties keeps back, the trade war appears far from over. Analysts warn that if prices remain in place for the next six months, companies will be forced to reduce investments, to hire slowly and even to dismiss workers, which increases the probability of a recession.