What you need to know

The White House has announced that new tariffs on imports to the United States will take effect today, potentially igniting a full-scale global trade war. President Donald Trump has referred to the imposition of tariffs as “Liberation Day” and is scheduled to officially unveil the “reciprocal tariffs” policy in the Rose Garden at 4pm. White House Press Secretary Caroline Leavitt said on Tuesday that the tariffs would be “effective immediately.”

Brushing aside market turbulence, Leavitt said, “Wall Street will be just fine,” adding that Trump is focused on ensuring that “Americans make out well.” However, uncertainty remains over the scope and scale of the tariffs. Trump is expected to invoke emergency economic powers to implement them. It is unclear whether he will levy individual rates on each trading partner, target specific countries, or apply a universal tariff on all imports.

Some economic simulations suggest that a broad-based escalation—such as a 20 percent tariff on all imports followed by retaliation—could cost up to 5.5 million jobs and drive the unemployment rate to 7 percent. Trump’s comments have hinted at universal tariffs, though he has dismissed proposals to target only the so-called “Dirty 15,” the 15 countries with which the U.S. runs its largest trade deficits.

Among these are China, whose surplus with the U.S. is nearing $300 billion, along with the European Union, Mexico, Vietnam, Taiwan, Japan, and South Korea. Trump has repeatedly said he takes issue with countries that run trade surpluses with the U.S. He has already raised tariffs on Chinese goods by 20 percent, imposed 25 percent duties on Canadian and Mexican imports, and hiked steel and aluminum tariffs to 25 percent.

These measures have already affected more than $1 trillion worth of imports—a figure that could rise to $1.4 trillion in the coming days. The S&P 500 has fallen 8.3 percent from its recent high, marking its worst second quarter since 2022. The tech-heavy Nasdaq has declined by approximately 14 percent from its peak.

America First

President of the European Commission Ursula von der Leyen said on Tuesday that the European Union has a “strong plan” to respond to tariffs imposed by the administration of Donald Trump. She said that the next sectors facing duties would include semiconductors, pharmaceuticals, and timber. In response to the U.S. steel and aluminum tariffs introduced in March, the Commission said it would retaliate against €26 billion worth of American goods. It is now consulting member states on a second round of measures—totaling about €18 billion—which would cover steel, aluminium, poultry, beef, seafood, and nuts.

The transatlantic trade relationship was worth roughly €1.6 trillion in 2023, with the bloc exporting significantly more to the U.S. than vice versa. Von der Leyen said the Commission prefers negotiation over confrontation, but acknowledged the rationale behind Trump’s drive to re-industrialize the U.S. She added that while the EU also seeks re-industrialization, tariffs would raise consumer prices, fuel inflation, and increase costs for American manufacturers reliant on foreign components.

Chinese state media reported on Tuesday that Beijing is seeking a coordinated response to U.S. tariffs with Japan and South Korea. However, officials in Tokyo and Seoul said no such agreement had been reached, although the three countries did hold trade talks over the weekend. The Chinese state broadcaster said the trio would enhance dialogue on supply-chain cooperation, export controls, and accelerate plans for a trilateral free-trade agreement.

The announcement noted that Japan and South Korea continue to import some semiconductor raw materials from China, while Beijing is interested in sourcing chip products from both.

All three nations maintain large trade surpluses with the United States.

It’s now the U.S. vs China, everyone else needs to pick a side

China launched large-scale military exercises around the island of Taiwan on Tuesday, part of its campaign to assert sovereignty and suppress Taipei’s efforts to preserve its de facto independence. The People’s Liberation Army (PLA) said that its naval, air, ground, and missile forces were conducting operations to seize “comprehensive control,” strike land and sea targets, and practice blockade tactics. Last month, Taiwan’s President Lai Ching-te said that the island was working to improve both military and civilian preparedness to deter infiltration attempts by what he called a “hostile foreign force.”

On Monday, the Chinese aircraft carrier Shandong entered Taiwan’s self-declared defense zone, which extends beyond its territorial waters and airspace. It reportedly came closer to Taiwan than ever before. The zone is monitored by Taiwanese forces to shadow foreign military activity.

The PLA, in a statement, referred to Lai as a “parasite.”

The Chinese military routinely conducts operations near Taiwan, and in May last year staged war games simulating the seizure of territory west of the so-called first island chain. These exercises, however, are at a new level.

Weather conditions mean that any invasion of Taiwan would have to occur during the April-May or September-October timeframes. However, an extended naval blockade may not be so constrained by weather conditions, and would test U.S. appetite for brinksmanship.

China considers Taiwan part of its own territory and has not ruled out the use of force to assert control. Foreign Ministry spokesperson Guo Jiakun said, “China’s reunification is an unstoppable trend. It will happen and must happen.”

Chinese Foreign Minister Wang Yi said on Tuesday during a visit to Moscow that China and Russia are “friends forever, never enemies.” He claimed this principle forms the legal basis for enhancing strategic cooperation. Wang, in Russia for three days of high-level talks, met President Vladimir Putin and held discussions with Foreign Minister Sergei Lavrov.

Wang dismissed suggestions that the administration of Donald Trump seeks to support Russia in order to undermine China, describing the idea as “a relapse of obsolete, confrontational bloc thinking.” On Trump’s efforts to broker a ceasefire between Russia and Ukraine, Wang said the move was “good for stabilizing the balance of power among major powers and inspires optimism in a disappointing international situation.”

Despite outward displays of unity, the Sino-Russian relationship is deeply asymmetrical, with Beijing wielding significantly more influence.

The two countries have fought several times—most recently in 1929 and 1969—and experienced long periods of strained ties. Since the 2022 invasion of Ukraine, China has imported steeply discounted Russian oil. In 2024, imports reached a record 108.5 million metric tons.

Nonetheless, any U.S. effort to drive a wedge between Beijing and Moscow is unlikely to succeed, given their shared resentment of Western strategic dominance, particularly that of the United States.