Then came the unwelcome surprise: “China will likewise be charged an additional 10% tariff on that date,” he wrote. The new tariff would be applied on top of an existing 10% duty imposed on Chinese tariffs on Feb. 4. 

“I do not know anyone who anticipated another 10% tariff against China so soon, and certainly not to be applied on Tuesday,” Deborah Elms, head of trade policy at the Hinrich Foundation, says. “This leaves zero time for adjustment by Chinese firms, and very limited time for the Chinese government to respond.”

Trump also reaffirmed plans to start imposing reciprocal tariffs on a country-by-country basis by April.

The S&P 500 dropped by 1.6% in Thursday U.S. trading, erasing all the index’s gains for the year so far.

Negative sentiment then crossed the Pacific to Asia. Hong Kong’s Hang Seng Index dropped by 3.3% on Friday. Chinese tech companies reported even larger declines, with the city’s Hang Seng Tech Index, which tracks technology companies, falling by 5.3% and denting a weeks-long DeepSeek-inspired rally in share prices. 

E-commerce giant Alibaba dropped by 6%. Chinese EV companies were also hit hard, with BYD, Geely and Li Auto falling by 6.8%, 7.6% and 8.1% respectively. 

Investor worries weren’t limited to China. Japan’s Nikkei 225 index dropped by 2.9%, South Korea’s KOSPI fell by 3.4%, and India’s NIFTY 50 is down 1.9%.

The cryptocurrency Bitcoin also took a hit, sinking 8.1% in the past 24 hours to drop below $80,000, a level not reported since early November.

The selloff then infected Europe: The Euro Stoxx 50 index was down 0.4% by 11.30 am local time. Germany’s DAX slid 0.3%, as did France’s CAC.

There was a glimpse of hope at dawn for U.S. markets. As the sun rose over New York, U.S. futures contracts in the S&P 500 were up 0.34% — an indicator that some investors think the drops are overdone.

‘Zero time’

Chinese companies may have found the first 10% tariff to be an unwelcome but ultimately manageable issue to deal with. But a second 10% tariff on top of that may be the breaking point for some Chinese manufacturers

“Many of the items hit hard are lower value products within profit margins,” Elms says. “It might be possible to figure out a solution to a 10% overnight price hike. But if we are talking about a 20% change within a month to pricing, this is very hard to absorb.”

Chinese companies have tentatively explored alternate markets, such as Latin America and Southeast Asia, to hedge against new tariffs from the U.S. But the speed of Trump’s new tariffs is too fast for firms to pivot, “leaving Chinese firms with inventory and possibly limited buyers,” Elms says.

Other markets may also not be keen on a flood of Chinese exports. Countries like South Korea and Vietnam are imposing targeted tariffs on some Chinese imports. 

What happens next?

Eyes now turn to Beijing to see how it will retaliate to Trump’s tariffs. China’s foreign ministry accused the U.S. of “blackmail” in its daily press conference. 

“If the U.S. insists on having its own way, China will counter with all necessary measures to defend its legitimate rights and interests,” China’s Minister of Commerce said in a statement on Friday. 

After Trump’s initial 10% tariff on China in February, Beijing retaliated with a 15% tariff on imports of U.S. coal and liquified natural gas; a 10% tariff on crude oil, agricultural machinery, large engine cars and pickup trucks; and an antitrust investigation into Google. 

Still, China’s response was relatively restrained—an attitude that Beijing might repeat in the face of Trump’s newest tariff threat.

“China is likely going to focus on what it needs to do, rather than a massive response,” says Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis. “You don’t really want to upset a ‘bully’ further.”

China’s political leadership is meeting for the so-called Two Sessions next week, where the country usually unveils its economic plan for the coming year.

Instead of broad retaliation, Garcia-Herrero expects that China will instead focus on opening its economy to the rest of the world, particularly the “Global South.”

And the threat of a harsh response is unlikely to dent Trump’s love for tariffs. “What is going to stop Trump isn’t China’s retaliation, or anybody else,” Garcia-Herrero says. “It’ll be the stock market.”