Trump’s Tariffs on China Are Back! Reasons and Impact

The US market has undergone a week full of turbulence after President Donald Trump announced the return of US tariffs on Chinese goods in response to the latter’s restrictions on on exporting rare minerals. This announcement heightened investors’ anxiety and reignited tensions between the world’s two largest economies as the two’s trade truce expired in November. The market also awaits Fed Chair Jerome Powell’s latest statements, in addition to the release of inflation readings later in the month.

The eurozone, on the other hand, remains under pressure as the French political crisis intensifies and industrial output, especially in automobiles, subsides in Germany. In time, the head of Germany’s central bank has called for a unified front to combat Chinese competition in Europe, which has led the European Union to impose trade tariffs on steel imports.

In Asia, Japan is facing a difficult patch as the country struggles to elect a new prime minister, especially following the withdrawal of the Komeito Party—a move that played a key role in last year’s election breakthrough. Meanwhile in China, markets fell back after Trump announced new tariffs targeting China, reigniting new trade war fears. That is far from being Beijing’s only challenge, as the country battles a shrinking workforce, which might in turn weigh on the country’s economic growth in the years ahead.

Critical key points:

●    Trump’s newest tariffs threaten the US-China’s third trade truce.
●    One of the most important economic data release announced.
●    A detrimental week ahead for Japanese elections.
●    The Chinese economy faces a new challenge.

Impact of Trump Tariffs on China

1. The US economy

Financial markets in the US had a rough end of the week after the US President, Donald Trump, shook markets with his decision to release a stream of threats to increase tariffs against China again after Beijing imposed restrictions on rare mineral exports. The news is viewed as a further threat to the two economic giants’ third trade truce, scheduled to finish by November 9.

The newly announced tariffs also include high tariffs on Chinese ships reaching American ports, starting October 14. Which in turn will raise the prices of goods imported to the US, forcing businesses to strike deals with non-Chinese ships, financially and logistically excruciating for everyone.

Last week also had many Fed members give varying statements on interest rates, while Jerome Powell chose to remain silent regarding future interest rate meetings, knowing that Powell is scheduled to speak again on the 14th of this month.

The US Bureau of Labor Statistics announced it will release September’s consumer inflation report on October 24 in order to help the Social Security Administration in determining the 2026 cost-of-living adjustment. While the release of other economic data is unlikely under the ongoing government shutdown, a shutdown is likely to become the longest in US history since 1981.

As for the few important US data releases last week, the Consumer Confidence Index came unchanged in October, showcasing American families ignoring the effects of the partial government shutdown, despite job market and inflationary fears.

US tariffs on China return

Within one day of China announcing its intent to put new restrictions on the country’s exports of rare minerals, the US president answered with reigniting the trade war between the two states, threatening to end the already shaky truce between the two trade partners ending on November 9.

The announced tariffs include a 100% tariff on all Chinese exports to the US alongside additional new export controls on essential software effective November 1. Trump has also thrown around remarks hinting at a possible cancellation of his meeting with the Chinese president in South Korea in three weeks' time.

Analysts view the possible upcoming trade war as having a lesser impact on the economy than it did in April. Nonetheless, markets had rapidly dropped on Friday to their lowest levels in six months, which was when Trump had imposed tariffs for the first time this presidency last April. Experts attribute that to two factors:
●    The US administration is keen to preserve momentum in the AI-driven economic boom, which is seen as stabilizing trade and growth.
●    China needs to maintain market stability, having seen notable recovery across its financial markets this year.

Optimism is also visible in Trump, despite imposing new tariffs on China, leaving the door open to possible negotiations. He stated that the announced tariffs are to be in effect at the start of November, as in two days after his scheduled meeting with his Chinese counterpart. Leaving a string of hope for a possible deal between the two leaders.

2. The EU economy

The political crisis in France is still looming over Europe’s economic recovery, in addition to the recession the German economy is undergoing across several sectors, especially the automobile one.

German central bank chief Joachim Nagel warned against complacency in trade tariffs and the Chinese competition in European markets, calling for European leaders to take measures against overall global competition as well and to widen their trade deals' scope.

Nagel’s statements had positive reactions, with the EU imposing new tariffs on steel imports to the continents, urging stronger protection for Europe’s economy rather than relying solely on limited trade agreements.

The European economy is to have several important economic releases this week, including inflation data and industrial production, as the region navigates growing global trade tensions.

3. The Japanese economy

Japan remains in a politically and economically mixed state after electing its first female leader of the Liberal Democratic Party. On October 15, Parliament is set to confirm Sanae Takahashi as Japan’s Prime Minister.

Takahashi’s rise boosted Japanese stock markets to record highs but weakened the yen, which hit a six-month low against the dollar and euro.

Her leadership faces an immediate challenge: the withdrawal of the Komeito Party, a former coalition ally, complicating her efforts to maintain political unity — a key factor behind her predecessor Shigeru Ishiba’s success last year. Markets are watching these developments closely.

4. The Chinese economy

Chinese markets fell about 2% following Trump’s renewed tariff announcement. After two rounds of temporary truces, this third ceasefire is now at risk of collapse, exposing Chinese exports to tariffs approaching the record highs of last April (up to 145% plus a base rate of 10%).

China also faces a demographic headwind. Oxford Economics warned that the country’s declining population could severely impact its labor force—a vital driver of global production. The firm estimates this decline could reduce China’s annual GDP growth by 0.5% over the next decade.

Some analysts believe Beijing may reconsider its rare earth export restrictions to ease tensions with Washington and preserve growing trade relations with Europe and India.

Economic calendar following Trump Tariffs on China

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