In early April 2025, there was a dramatic escalation between the U.S.-China trade, with up to 145% tariffs on Chinese imports that sent a shockwave through global markets and significantly raised concerns of a recession. In retaliation, China also increased as high as 125% on the imported U.S. goods which effectively froze the bilateral trade and greatly strained global supply chains in a matter of days.
The immediate aftermath of these hikes in tariffs was directly reflected by the instabilities in the market. U.S. stock indices experienced sharp declines with S&P 500 and Nasdaq. U.S. stocks lost almost $6.6 trillion in just over a two-day period, the largest loss in history. Simply put the stock market had the best and worst day in the same week because of this turmoil of imposing tariffs on all and then pausing them for some countries later. After the government-imposed tariffs, economists estimate that GDP growth forecast projections suggest a slowdown from 2% projection earlier in the year to 0.8% by Q4 of 2025.
American companies are grappling with these increased costs due to the tariffs which led many to pressure their suppliers to lower the prices. It is not just affecting Chinese suppliers as tariffs are in place for almost every major supplier exporting goods to United States. Because almost every manufacturer already operates on very thin margins, companies have very limited capacity to absorb these costs which will result in these extra costs being transferred directly to American consumers. Electronics items like smartphones and laptops were exempted from these tariffs to prevent further price hikes for consumers, at least for now.
These tariffs have also caused a significant amount of disruption in global trade logistics. Vessels were stranded or diverted, affecting major shipping routes which is leading to congestion at major European ports like Rotterdam and Hamburg. The U.S. government has also introduced a $1 million fee on every vessel originating from China that is docking at American ports which is further complicating international shipping operations. These trade tensions have also strained U.S. relations with it closest allies and trading partners. International leaders from all over the world, including the European Union, the UK, Germany, Japan and India have all started intensive negotiations and are trying to resolve this matter during the current 90-day pause of tariffs. As of the time of writing, there are no major talks with China’s firms stance because of unpredictability with United States. The absence of leadership level negotiations have left businesses scrambling to diversify their producers and consumers at an unprecedented rate.
Economists warns that these prolonged these trade conflicts could have serious detrimental effects on global economy that took was established over a span of a century but is being forced to adapt to quick drastic changes. JP Morgan Chase CEO Jamie Dimon has cautioned that these tariffs could not just increase inflation but also hinder economic growth while emphasizing the urgency of resolving these trade issues. As the situation continues to develop, we might soon see a $2,000 base iPhone.
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