China readies to 'fight to the end' against Trump's tariff, Europe plans counterattack

China has refused to back down as a global trade war ignited by President Donald Trump's tariffs continues to impact markets, deepen diplomatic rifts, and threatens global economic stability.

China blasted what it described as "blackmail" by the United States, after Trump vowed to hike tariffs on Chinese goods to over 100% starting Wednesday. The move was in retaliation for Beijing's decision to match the "reciprocal" duties Trump unveiled last week - an aggressive tit-for-tat escalation that has upended hopes for a negotiated truce.

"The US side's threat to escalate tariffs against China is a mistake on top of a mistake," China's commerce ministry said in a blistering statement. "If the US insists on having its way, China will fight to the end."

Beijing's hardline stance, a sharp pivot from its earlier calls for dialogue, signals a new phase in the economic confrontation between the world’s two largest economies.

The Communist Party’s flagship newspaper declared on Monday that China is “no longer clinging to illusions” of a deal, even as it keeps a narrow window open for future negotiations.

Fallout of Trump's tariffs

The fallout of the Trump's tariffs, announced on April 2, has been swift and severe. Stock markets around the world have plunged amid fears of a prolonged trade standoff. Though Tuesday saw a partial recovery - with Japan's Nikkei closing 6% higher and Chinese blue chips rebounding by 1% - the volatility underscored deep investor unease.

European shares bounced from 14-month lows, while US futures posted mild gains after a bruising stretch that erased trillions in value.

“There is a certain form of mourning,” said Stephane Boujnah, head of Euronext, Europe’s major stock exchange operator. “The United States that we had known… now resembles more an emerging market.”

Citi lowered its 2025 China GDP forecast from 4.7% to 4.2%, citing growing external risks. Global financial institutions — including UBS, Goldman Sachs, and Morgan Stanley — have issued similar warnings, with some analysts predicting this could be the most disruptive round of tariffs since the Great Depression.

Europe weighs counterattack

The European Union, meanwhile, is carefully calibrating its response. EU Commission President Ursula von der Leyen urged Premier Li Qiang in a phone call to support a “fair trading system” and proposed a joint mechanism to monitor trade diversion — the redirection of cheap Chinese exports away from the US and toward Europe.

The EU has proposed its own 25% counter-tariffs on a variety of US goods, including soybeans and sausages. Talks of a “zero-for-zero” tariff deal with Washington are also on the table, but Brussels is walking a tightrope between standing firm and avoiding consumer backlash.

Xi’s tightrope walk

Chinese President Xi Jinping is facing the dual challenge of projecting strength abroad while bolstering an economy still recovering from a housing crisis and slowing consumer demand. Beijing has signaled plans to accelerate domestic stimulus to support industries hit by the tariffs, while also seeking new partnerships abroad - from Southeast Asia to the European Union.

“Rather than aiming to inflict significant damage, the goal seems to be to exert pressure and encourage dialogue,” said Henry Gao, a trade law expert at Singapore Management University.

China's evolving strategy includes reducing reliance on U.S. trade altogether. In 2017, the US accounted for 19% of Chinese exports; today, that number is under 15%. American soybean exporters, once dominant in China, have lost major ground to Brazil.

Still, Xi’s government isn’t aiming for a full decoupling. Analysts suggest Beijing is bracing for a drawn-out standoff while keeping diplomatic channels ajar.

“China wants to convey to the US that it is not intimidated and is willing to stand its ground,” Gao said.