Trump Says China “Played It Wrong” On Retaliatory Tariffs — Now Beijing Faces Three Options

Update (0949ET):

President Trump wrote on Truth Social that China “played it wrong” after Beijing announced retaliatory tariffs on imported US goods earlier this morning.

“They panicked,” Trump said, adding, “The one thing they cannot afford to do!” 

And now, cue Trump’s re-retaliatory tariffs this weekend…

100,000% re-retaliatory tariff incoming pic.twitter.com/Rhx3RNTQXH

— zerohedge (@zerohedge) April 4, 2025

China has three options in the wake of Trump’s “Liberation Day” tariff blitz: 

1. Concede defeat to whatever terms Trump demands
2. Devalue the yuan by 20-40%
3. Unleash biggest fiscal stimulus in its history (talking $2-3 trillion) which will push its debt off the chart

China has three options:

1. Concede defeat to whatever terms Trump demands
2. Devalue the yuan by 20-40%
3. Unleash biggest fiscal stimulus in its history (talking $2-3 trillion) which will push its debt off the chart

— zerohedge (@zerohedge) April 4, 2025

On China’s potential response, George Saravelos, Global Head of FX Research at Deutsche Bank, provided clients with more color (read: here)… 

.   .   . 

U.S. equity futures took another leg lower, the VIX spiked to 36, Treasury yields slipped (UST10Y <4%), crypto tumbled, and the dollar reversed its European session gains—just after 06:00 ET—when China hit back at President Trump’s “Liberation Day” tariff blitz.

Beijing retaliates:

China to impose additional 34% tariffs on **all** imported U.S. products starting April 10, the official Xinhua news agency reports.

— Javier Blas (@JavierBlas) April 4, 2025

According to state-run Xinhua, Beijing announced it would slap 34% retaliatory tariffs on all U.S. imports starting April 10. Details were scarce at the moment. 

“Chinese authorities said they will start a probe into medical CT X-ray tubes imported from the US and India, and halt imports of poultry products from two American companies,” Bloomberg noted. 

Xinhua also reported that Beijing announced export control measures on certain rare earth-related items but did not provide specifics.

China announces export control measures on certain rare earth-related items pic.twitter.com/HBW2ahcjv1

— China Xinhua News (@XHNews) April 4, 2025

The move comes two days after Trump’s tariff-a-palooza pushed the effective U.S. tariff rate on Chinese goods to 54%.

Deutsche Bank’s George Saravelos noted on Thursday that the big negative surprise this week has been the 50%+ tariff rate on China (far worse than expectations) and the key connector economy Vietnam, which affected $600bn worth of manufactured goods to the U.S. combined.

Goldman helped clients visualize this move. 

On Thursday, Beijing condemned the escalating tariff war, calling it “unilateral bullying. ” It added that it “firmly opposes” the tariff war and “will resolutely take countermeasures to safeguard its own rights and interests.”

And here we are—risk assets getting hammered again on a Friday morning—as tensions between Washington and Beijing escalate sharply to end the week. Both superpowers remain locked in a stalemate over China’s subsidization of fentanyl precursor chemicals to Mexico, which has fueled the overdose death crisis in the United States. 

Stay on top of the tariff war:

• The Only Chart That Matters… Global Impact Of Trump Tariffs Will Be Determined By Beijing

• “Reign Of Tariffs” Begins: All You Need To Know About Trump’s “Reciprocal” Trade War

• Beijing Slams Trump’s “Unilateral Bullying” Tariffs, Signals Retaliatory Action

In markets, main US equity futures indexes were hammered lower after China retaliated. 

A lot more red. 

UST10Y <4%.

Implied interest rate cuts top 4.5 for the year. 

Bitcoin tumbles.

Dollar loses steam after European surge. 

And Yuan weaker.

*Developing…