On April 4, 2025, China declared a 34% tariff on all imports from the U.S., effective April 10, as a direct reaction to recent U.S. tariff hikes on Chinese products.

This turn of events has escalated trade tensions between the two largest economies, causing considerable volatility in global financial markets.

In the U.S., major stock indices faced significant declines.

The S&P 500 dropped by 4.8%, marking its largest one-day decline since June 2020. The Dow Jones Industrial Average fell by 4%, while the Nasdaq Composite saw a decrease of 6%, entering bear market territory.

The CBOE Volatility Index (VIX), often called Wall Street's 'fear gauge,' spiked, signaling increased market uncertainty.

The energy sector also experienced notable declines.

West Texas Intermediate (WTI) crude oil prices plummeted by 7.4%, closing at $62 per barrel.

In the bond market, the yield on the U.S. 10-year Treasury note fell to 3.99%, reflecting heightened demand for safe-haven assets amid rising trade tensions.

China's retaliatory actions encompassed not only the imposition of tariffs but also the establishment of export controls on crucial rare earth elements like samarium and gadolinium, which are vital for various high-tech and defense technologies.

Moreover, China halted imports of specific U.S. agricultural goods and added several U.S. companies to its trade sanctions and export control lists.

These moves have raised alarm among economists and policymakers regarding the potential for a global economic downturn.

The International Monetary Fund has cautioned that the escalating trade conflict could result in higher inflation and slower economic growth on a global scale.

As the situation evolves, market participants and analysts are carefully tracking further policy announcements and economic indicators to evaluate the wider implications of the ongoing trade dispute.