Tuesday’s early gains across U.S. equities and digital assets evaporated by mid-afternoon as escalating trade tensions between the world’s two largest economies injected fresh uncertainty into markets. The White House confirmed that the effective tariff rate on Chinese imports will rise to 104%, doubling earlier threats.
Risk Assets Retreat on Tariff Shock
The S&P 500, Nasdaq, Dow Jones, and NYSE all gave back their morning advances by 2 p.m. Eastern time. The broader cryptocurrency market shed 2.5% over the past 24 hours, bringing its total capitalization to $2.43 trillion. Bitcoin (BTC) briefly plunged to $76,500 before recovering to trade back above the $77,000 threshold. Gold held below the $3,000 mark at $2,981 per ounce.
Trump Threatens Escalation, China Refuses to Bend
President Donald Trump initially warned China could face a tariff rate of 50% unless it withdrew retaliatory duties. By Tuesday afternoon, the White House confirmed the figure had reached 104%. In a post on Truth Social, Trump claimed to have had a “great call” with South Korea’s acting president and insisted that China “also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call. It will happen.”
Beijing, however, has shown no sign of backing down. China’s Ministry of Commerce accused the United States of “blackmail” and vowed to “fight to the end,” according to The New York Times. China has already threatened 34% counter-tariffs on U.S. goods. Trump’s broader campaign against alleged unfair Chinese trade practices includes accusations of intellectual property theft, forced technology transfers, and export subsidies.
Fed Rate Cut Bets Intensify
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, described the tariffs as “way bigger than expected” and warned that policymakers may need to act swiftly. “We just lived through and learned what happens when inflation is raging out of control,” Goolsbee told Illinois Public Radio. On the prediction market Polymarket, the probability of an emergency rate cut by the Fed jumped 3 percentage points on Tuesday, reflecting mounting fears of an economic slowdown triggered by the trade war.