China Raises Tariffs to 125%, Announces Strategic Shift in Trade Retaliation

China's Strategic Shift

*CHINA:NO LONGER MAKES ECONOMIC SENSE IF US IMPOSES MORE TARIFFS
*CHINA TO LAUNCH 200 BILLION YUAN PLAN TO SUPPORT EXPORT-TO-DOMESTIC SALES TRANSITION.
*EXPANDS SERVICE SECTOR OPENING-UP PILOT TO 9 MORE CITIES, INCLUDING
*CHINA STOCK EXCHANGES SET DAILY RESTRICTIONS ON NET SHARE SALES BY INDIVIDUAL HEDGE FUNDS AND BIG RETAIL INVESTORS,
*CHANGES STATUS OF US CHIPS TO PERMIT THEIR IMPORT

As Hong Kong markets closed Friday, Beijing moved decisively against U.S. tariff escalation by raising duties on American goods to 125%, up from 84%. The increase, announced by the State Council Tariff Commission, comes in direct response to Washington’s effective tariff rate on Chinese imports, which now stands at approximately 145%.

In a statement, the commission declared that China would “no longer respond” to any further tariff increases by the United States. This signals a clear tactical shift. While the tariff war has escalated to historic levels, Beijing now appears to be capping its tariff retaliation and turning to non-tariff tools.

Earlier in the week, the White House temporarily suspended additional country-specific tariffs for nations that have refrained from retaliating, in an apparent bid to isolate China from other trade partners.

Beijing's position was firm. “Given that at the current tariff level, there is no market acceptance for U.S. goods exported to China. If the U.S. continues to impose tariffs on Chinese goods exported to the U.S., China will ignore it,” said the Tariff Commission.

The Commerce Ministry followed with a statement framing further U.S. tariffs as economically irrelevant: “Even if the U.S. continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of the world economy.”

Alongside tariff caps, Beijing is deploying a range of alternative retaliatory levers. These include a slowdown in rare earth exports, a reduction in Hollywood film import quotas, and further depreciation of the yuan. While none of these constitute formal tariff hikes, their impact on U.S.-linked supply chains and soft power industries is already visible.

“The escalation phase of the bilateral tariff war is effectively over,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “Both China and the U.S. have sent clear messages. There is no point in raising tariffs further.”

U.S. corporates are beginning to feel the impact. Analysts have already trimmed revenue expectations for Apple and Tesla in China. Separately, speculation has grown that China may have quietly scaled back purchases of U.S. Treasuries—a potential pressure point in the financial leg of this economic confrontation.

Supply chain disruptions are emerging. Amazon has reportedly canceled orders, while Walmart has pulled forward guidance amid increased cost volatility. Independent sellers in China are also reported to be facing uncertainty across major U.S. platforms.

Goldman Sachs analysts have revised China’s growth forecasts downward. Real GDP is now projected to slow to 4.0% in 2025 and 3.5% in 2026—both 50 basis points lower than prior estimates. Additional easing is expected from Chinese monetary authorities to cushion domestic fallout.

Despite entrenched positions, China’s Commerce Ministry reiterated its willingness to negotiate. Whether or when formal talks resume remains uncertain.

U.S. Treasury Secretary Scott Bessent, in comments earlier this week, described China as “the most imbalanced economy in the history of the modern world,” framing the current escalation as a net loss for Beijing.

Still, Chinese officials have not signaled retreat. On the contrary, the official line remains defiant. “If the trade war deepens,” a ministry spokesperson stated, “China will resolutely counter-attack and fight to the end.”