Recession fears as China and EU retaliate against Trump’s tariffs

The global economy appears to be in open rebellion against US President Donald Trump’s tariffs as they took effect on Wednesday.

Business executives are warning of a potential recession caused by his policies, some of the top US trading partners are retaliating with their own import taxes and the stock market is quivering after days of decline.

Mr Trump’s tariffs kicked in shortly after midnight in the US, including 104% on products from China, 20% on the European Union, 24% on Japan and 25% on South Korea.

Trump administration officials have tried to reassure voters, Republican politicians and chief executives that the rates are negotiable, but by their own admission that process could take months.

Government bond prices are down, pushing up the interest rate on the 10-year US treasury note to 4.39% in a sign that the world is increasingly suspicious of Mr Trump’s moves.

The Republican president was publicly defiant as the stock market recovered slightly and then sold off in morning trading.

“THIS IS A GREAT TIME TO BUY!!!” he posted on Truth Social, his social media site. “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!”

Presidents often receive undue credit or blame for the state of the US economy as their time in the White House is subject to financial and geopolitical forces beyond their direct control. But by unilaterally imposing tariffs, Mr Trump is exerting extraordinary influence over the flow of commerce, creating political risks that could prove difficult to avoid if his plans do not pan out.

After early success in exerting control over American institutions, from law firms and universities to federal agencies and cultural organisations, he is now facing off with global markets that will not simply bend to his will.

JPMorgan Chase chief executive and chairman Jamie Dimon said there would “probably” be a recession, although he also deferred to his economists.

“I do think fixing these tariff issues and trade issues would be a good thing to do,” he said in an interview on Fox Business Network.

On news channel CNBC, Delta Air Lines chief executive Ed Bastian said the administration was being less strategic than it was during Mr Trump’s first term.

“Trying to do it all at the same time has created chaos in terms of being able to make plans,” he said, noting that demand for air travel has weakened.

Economic forecasters say Mr Trump’s return to the White House has had a series of negative and cascading effects that could put the country into a downturn.

“Simultaneous shocks to consumer sentiment, corporate confidence, trade, financial markets as well as to prices, new orders and the labour market will tip the economy into recession in the current quarter,” said Joe Brusuelas, chief economist at the consultancy RSM.

Treasury secretary Scott Bessent has previously said it could take months to strike deals with countries on tariff rates, and the administration has not been clear on whether the baseline 10% tariffs imposed on most countries will stay in place. But in an appearance on Fox Business Network’s Mornings With Maria, Mr Bessent said the economy would “be back to firing on all cylinders” at a point in the “not too distant future”.

He said there has been an “overwhelming” response by “the countries who want to come and sit at the table rather than escalate”. Mr Bessent mentioned Japan, South Korea, and India.

“I will note that they are all around China. We have Vietnam coming today,” he said.

Even as the administration has tried to calm the world, new risks are forming.

China imposed 84% tariffs on goods from the United States. Canada now has car tariffs to match the 25% being charged by Washington. The EU approved new taxes on US goods after the 25% steel and aluminum tariffs from Mr Trump.

Mr Trump is already calling for more tariffs, looking at copper, lumber and computer chips. In a speech on Tuesday night, he said taxes on imported drugs would happen soon.