A global trade war touched by U.S. President Donald Trump's sweeping tariffs escalated further on Monday, as Trump threatened to increase duties on China and the European Union proposed counter-tariffs of its own.
Financial markets across the globe posted a third day of losses as investors worried that steep trade barriers around the world's largest consumer market could lead to a recession.
Trump's advisers said he would be willing to negotiate with countries that are scrambling to head off tariffs as high as 50% due to take effect on Wednesday. But the president himself ruled out discussions with Beijing as he ratcheted up a confrontation with the world's No. 2 economy.
Trump said he would impose an additional 50% duty on U.S. imports from China on Wednesday if it did not withdraw the 34% tariffs it had imposed on U.S. products last week. Those Chinese tariffs had come in response to 34% "reciprocal" duties announced by Trump.
"All talks with China concerning their requested meetings with us will be terminated!" he wrote on social media.
The European Commission, meanwhile, proposed counter-tariffs of 25% on a range of U.S. goods, including soybeans, nuts and sausages, though other potential items like bourbon whiskey were left off the list, according to a document seen by Reuters.
Officials said they stood ready to negotiate a "zero for zero" deal with Trump's administration. "Sooner or later, we will sit at the negotiation table with the U.S. and find a mutually acceptable compromise," EU Trade Commissioner Maros Sefcovic said at a news conference.
The 27-member bloc is struggling with tariffs on autos and metals already in place, and faces a 20% tariff on other products on Wednesday. Trump has also threatened to slap tariffs on EU alcoholic drinks.
The back-and-forth injected further turbulence into global financial markets, which have fallen steadily since Trump's announcement.
U.S. stocks swung wildly, spiking after a report that Trump was considering a 90-day tariff pause, then turned negative again after the White House dismissed the report as "fake news."
Asian and European shares also plunged as investors feared the duties Trump has likened to "medicine" could lead to higher prices, weaker demand and potentially a global recession. Goldman Sachs raised the odds of a U.S. recession to 45%.
Trump administration officials say he is following through on a promise to reverse decades of trade liberalization that he believes has undercut the U.S. economy. But they also said he is willing to negotiate with dozens of countries that have reached out for talks.
"He's doubling down on something that he knows works, and he's going to continue to do that," White House economist Kevin Hassett said on Fox News. "But he is also going to listen to our trading partners, and if they come to us with really great deals that advantage American manufacturing and American farmers, I'm sure he'll listen."
China's retaliatory levies are the firmest response yet to Trump's announcement, which has been met with bewildered condemnation from other leaders. Beijing called Trump's behaviour "economic bullying".
After stocks in mainland China and Hong Kong cratered on Monday, China's sovereign fund stepped in to try to stabilise the market.
Shares in Taiwan plummeted almost 10% - the biggest one-day percentage fall on record.
Wall Street leaders issued warnings on U.S. tariffs, with JPMorgan Chase (JPM.N) CEO Jamie Dimon saying they could have lasting negative consequences, while fund manager Bill Ackman said they could lead to an "economic nuclear winter."
Ackman is one of a handful of Trump supporters who questioned the strategy. Billionaire Elon Musk, who is leading Trump's effort to slash government spending, called for zero tariffs between the U.S. and Europe over the weekend.
On Monday, Trump trade adviser Peter Navarro dismissed the Tesla CEO as a "car assembler."
TACTICS, OR NEW REGIME?
Investors and political leaders have struggled to determine whether Trump's tariffs are part of a permanent new regime or a negotiating tactic to win concessions from other countries.
Some in the EU worry that a forceful response risks even more blowback on European exporters of everything from French Cognac and Italian wine to German cars.
Volkswagen's Audi is holding back cars that arrived in U.S. ports after April 2 because of the newly imposed 25% autos tariff. Aircraft parts supplier Howmet Aerospace (HWM.N) may halt some shipments if they are impacted by tariffs, according to a letter seen by Reuters.
Prime Minister Shigeru Ishiba of Japan, one of Washington's closest allies in Asia, held a phone call with Trump to push for a deal and said he would visit Washington at an appropriate time.
Other governments in Asia have also signalled a willingness to engage.
Taiwan's President Lai Ching-te on Sunday offered zero tariffs as the basis for talks, while an Indian government official said Delhi does not plan to retaliate.
Investors are now betting the growing risk of recession could see the U.S. Federal Reserve cut rates as early as next month. Trump repeated his call for the central bank to lower rates on Monday, but Fed chief Jerome Powell has so far indicated he is in no rush.
