The direct trade dispute between the US and China escalated further on Wednesday, even as broader market sentiments saw the bailout.
China announced an increase in tariffs on US goods at 84%. This is expected to take effect on April 10th. This represents President Donald Trump's direct response to his previous imposition of 104% tariffs on Chinese imports. These strict measures are intensifying the ongoing trade war between the two largest global economies.
How did the market respond to contradictory news?
Interestingly, certain US-China tensions have worsened, but broader financial markets, including crypto, have shown slight recovery in the last 24 hours. The rally announced a 90-day suspension in response to news reports from the White House, with other planned US tariff hikes (not related to active Chinese tariffs).
Before this pause, Bitcoin had temporarily fallen below $75,000, and Ethereum had tested levels of nearly $1,400.
Compared to January, Bitcoin is currently down about 30%, with the overall cryptocurrency market losing around $1.2 trillion since early February. However, market sentiment is currently improving, with Bitcoin trading around $82,280 (up about 8.5% in 24 hours at the time of writing) and nearly $1,600 in Ethereum.
China's retaliation, as expected, led to immediate volatility across financial markets in general. US stock index futures saw a sharp drop early in the week before tariff suspension news spurred the recovery. European and Asian markets also faced a decline, reflecting initial concerns over growing global trade tensions.
What are the broader economic concerns?
The escalating tariff war between the US and China raises concerns about the possibility of a global economy slowdown. The International Monetary Fund warns that such trade disputes could weaken global growth, increase inflation and disrupt financial markets. In fact, many celebrities in finance and CEO shared similar ideas, including BlackRock CEO Larry Fink and JPMorgan CEO Jamie Dimon.
The impact of the tariff war can be seen everywhere earlier today, as the US Treasury yields witnessed an unparalleled 56 basis points increase over three days, adding additional concerns to financial analysts and investors.
Caution is advised as the situation remains liquid and could have a more widespread impact on a variety of assets, with a core US-China trade dispute showing no signs of ending soon.
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