Oil Prices Plunge as China Hits Back with Massive Tariffs on US Imports

The global economy was rocked on Wednesday after China announced sweeping retaliatory tariffs of 84% on U.S. imports, up from 34%, in response to President Donald Trump ’s latest tariff escalation. The move triggered sharp sell-offs in stock markets and sent oil prices tumbling below $60 per barrel for the first time since early 2021.

Stock Markets in Freefall

European markets bore the brunt of the shock, as trading in US hasn't begun yet. London’s FTSE 100 index dropped 3.4%, Germany’s DAX lost 3.4%, and France’s CAC 40 matched the fall with a 3.4% decline. The broader Stoxx 600, which tracks the biggest companies across Europe, plunged 4.2%, marking one of its worst trading days in years.

Wall Street also braced for a rough open, with U.S. stock futures sliding 1.5% in premarket trading following China’s announcement.

Oil Prices Drop Below $60

Energy markets were hit hard. Brent crude futures fell steeply to as low as $58.47 a barrel—a level not seen since February 2021. Oil prices continued to slide throughout the morning, ultimately losing around 6% to settle near $56 per barrel.

The steep fall reflects investor fears of a slowdown in global demand and heightened geopolitical uncertainty.

U.S. Farmers Face Devastating Blow

China’s tariffs are expected to disproportionately impact American agriculture, particularly U.S. farmers who export large volumes of oilseeds and grains to China. The U.S. exports roughly $145 billion in goods to China annually, much of which is made up of agricultural products.

The latest tariff hike will likely shut many U.S. producers out of the Chinese market altogether, compounding financial pressures on rural communities already facing market volatility and high interest rates.

Treasury Yields Jump Amid Market Jitters

U.S. Treasury bonds—typically seen as a safe haven in times of uncertainty—were also caught in the storm. The benchmark 10-year yield climbed to 4.42%, up 0.12 percentage points for the day, though still below its intraday peak of 4.51%. The 30-year Treasury yield also rose to above 4.9%.

Bond yields rise when prices fall, suggesting investors are dumping bonds in response to growing concerns over inflation and potential recession risks.

The Escalating Tariff War

Wednesday’s turmoil follows a dramatic series of tariff announcements from the Trump administration. It began with a 10% tariff on Chinese goods, citing Beijing’s failure to curb fentanyl exports. Trump then doubled the tariff to 20%, before tacking on an additional 34% as part of a broader trade crackdown.

When China responded with its own matching tariffs, Trump added yet another 50%, bringing the total U.S. tariff on Chinese imports to 104% as of early Wednesday morning.

What’s Next?

Economists are warning that the deepening trade war could tip the global economy into a recession—or worse, a period of stagflation marked by rising prices and stagnant growth.

Markets will be closely watching for any signs of de-escalation between the two economic giants. But for now, the message from investors is clear: the risks are rising fast.