China shuts down trade with US in riposte to Trump

China has raised tariffs against the US to 125pc, effectively shutting out imports from the world’s biggest economy in a major escalation of the trade war.

The tit-for-tat move follows Donald Trump’s decision to raise tariffs on Chinese goods to 145pc in an announcement that sparked another global share sell-off.

China’s foreign ministry signalled its decision to effectively double the cost of US goods at the border was made “to block any possibility of market acceptance for US goods exported to China”.

A spokesman said Beijing would not raise tariffs any more, even if the US retaliated, while a separate statement by the commerce ministry branded the levies “a joke”.

The foreign ministry said: “Given that there is no longer any possibility of market acceptance for US goods exported to China under the current tariff levels, if the US side subsequently continues to impose tariffs on Chinese goods exported to the US, the Chinese side will pay no attention to it.”

The US buys far more goods from China than Beijing buys from the US. China is America’s third biggest export market after Canada and Mexico, as well as its biggest import partner.

America exported goods worth $143.5bn (£109.5bn) to China in 2024, compared with $439bn of imports, according to US census bureau data.

This suggests American buyers may face a bigger challenge finding alternative sources for imports that include smartphones, laptops, batteries, electrical goods and toys that account for the largest share of goods bought from China.

This could increase the US trade deficit with Beijing in the short term.

Rory Green, at TS Lombard, said trade barriers between the two economies were now so high that even tariffs of “a million per cent” would make little difference.

He estimated that tariffs would likely knock more than two percentage points off Chinese growth in the coming year: “A large hit but one that Beijing is capable of offsetting,” he said.

He said companies in China were likely to spend the next three months finding ways to reroute their goods through other countries such as Vietnam, which were handed a partial reprieve by the Trump administration.

Mr Green added: “Forthcoming fees on Chinese vessels docking in the US may slow some trade. Nevertheless, there are huge incentives for buyers and producers to move goods quickly. Apple flew in five planes loaded with iPhones last Friday.”

The US goods trade deficit with China was $295.4bn in 2024, a 5.8pc increase compared with the previous year, according to data published by the US Trade Representative.

The commerce ministry repeated a vow to “fight to the end” in the escalating trade war. “It’s become a joke,” the ministry said in a statement.

Soy beans were the biggest US export to China last year.

It means an effective embargo on US goods would hurt farmers in the Upper Midwest as the leading soy bean-producing states, with shipments to the US worth $12.8bn last year.

More than 80pc of America’s soy beans are cultivated in states including Illinois, Iowa and Minnesota.

Farmers were badly hurt during Mr Trump’s first trade war with China in the late 2010s, with many relying on $23bn in subsidies to prop up the sector.

Beijing retaliated by buying soy beans from other countries, including Brazil, the world’s biggest producer, before agreeing to buy more from the US under a deal struck in 2020.

Businesses in Texas and Louisiana – both Republican strongholds – also stand to lose in the trade war. Both states export billions of dollars worth of oil and gas to China every year.

Mr Green, at TS Lombard, said he was still hopeful of a deal. “President Xi cannot back down in the face of ‘trade bullying’,” he said. “But nor can President Trump as trade negotiations with other nations get under way.

“We believe that fundamentally, both sides want a deal and there is sufficient common ground to negotiate an agreement.”