Countries across the globe are preparing to escalate a trade war with the United States after President Donald Trump announced sweeping new tariffs, sparking fears of sharp price hikes in the world’s largest consumer market.
The announcement, made Wednesday, sent shockwaves through global financial markets. By Thursday, stock indexes plunged and world leaders expressed alarm, signaling a possible end to the era of free trade that has shaped global economics for decades.
Confusion emerged from the White House over whether the tariffs were permanent or a bargaining tool. While Trump suggested they were strategic—saying they “give us great power to negotiate”—some of his top advisers emphasized the increases were not intended as leverage.
If implemented fully, the tariffs would mark the most significant trade barriers the U.S. has enacted in over a century. A baseline 10% tariff would apply to all imports, with steeper rates targeting top trade partners. Analysts warn this could drastically raise consumer prices in the U.S. Items ranging from cannabis products to iPhones may see substantial price hikes—an upgraded iPhone could climb to nearly $2,300, according to Rosenblatt Securities.
U.S. businesses scrambled to adjust. Automaker Stellantis announced temporary layoffs in the U.S. and factory closures in Canada and Mexico. Meanwhile, General Motors said it would ramp up domestic production to shield itself from the impact.
The global response was swift. Canadian Prime Minister Mark Carney criticized the U.S. for abandoning its role as a leader in global economic cooperation, introducing a modest set of countermeasures. China and the European Union vowed retaliation—Beijing over Trump’s new 54% tariffs on Chinese imports, and Brussels over a 20% duty on EU goods. French President Emmanuel Macron urged European nations to suspend investment in the U.S.
Other major partners, including Japan, South Korea, Mexico, and India, are adopting a wait-and-see approach, opting not to retaliate immediately while seeking possible concessions.
However, the broader mood among allies and rivals was one of grave concern. Japanese Prime Minister Shigeru Ishiba called the situation a “national crisis,” and the International Monetary Fund warned that the tariffs pose a major risk to the already fragile global economy.
IMF Managing Director Kristalina Georgieva urged all parties to de-escalate: “We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”
Despite internal White House mixed messaging, Commerce Secretary Howard Lutnick and trade adviser Peter Navarro insisted the tariffs are here to stay. Yet, Trump later signaled flexibility, calling them a powerful negotiation tool.
Markets reacted sharply. U.S. stocks saw their worst day in years: the Dow dropped nearly 4%, the S&P 500 nearly 5%, and the Nasdaq nearly 6%—its steepest fall since the early pandemic days of March 2020. Companies with significant overseas production, such as Nike and Apple, suffered major losses. Nike’s shares dropped 14%, and Apple’s fell 9%.
Asian markets followed suit as Japan’s Nikkei slid 1.85% on Friday, deepening Thursday’s 2.8% drop. Chinese markets were closed for a holiday, providing temporary insulation from the market turmoil.
As tensions mount, the global economy teeters on the edge of a prolonged trade conflict—one that could redefine international commerce for years to come.
