World Economy on the Brink as Trump’s Tariff War Sparks Retaliation, Market Shock

The world economy is on the brink of recession after a blanket wave of tariffs by U.S. President Donald Trump against some of the country’s trading partners.

At least 64 nations hit with Trump’s notice of intention since his announcement one week ago retaliated with countervailing actions, while other countries are continuing to negotiate in a bid for more favorable trade terms. Most drastic escalation on Wednesday saw Trump impose tariffs of 125% on Chinese imports from 104%.

China and others must understand that it is no longer possible to take advantage of the U.S. economically,” Trump posted on Truth Social. China responded by raising its tariffs on U.S. products to 84% and filing an official complaint with the World Trade Organization, accusing the U.S. of breaking global trade rules.

The two countries, the United States and China, together traded goods valued at approximately $585 billion last year. The U.S., however, ran a trade deficit of $295 billion with China, a figure far below the $1 trillion that Trump has stated publicly.

The European Union also responded with its own tariffs on Trump’s 25% tariff on steel and aluminum imports, which became effective in March. Further EU tariffs on products valued at €13.5 billion in May and another €3.5 billion by December—have been announced. Hungary, led by Prime Minister Viktor Orban, was the sole country to vote against the EU response, calling for negotiation instead of retaliation.

European markets were affected. France’s Cac 40 fell 3.34%, Germany’s Dax finished 2.96% lower, and the UK’s FTSE 100 was at a 13-month low with a decline of 2.92%.

Incoming Chancellor of Germany Friedrich Merz blasted Trump’s move, cautioning against fiscal instability and uncertainty. He reiterated the German commitment to European cohesion and competitiveness. Canada, too, was affected by U.S. tariffs and imposed retaliatory duties on its own, such as 25% on U.S. cars and billions of other products.

The economic ripple effect crashed into the energy industry. Oil prices plummeted, WTI crude falling 6.68% at $55.60 a barrel and Brent crude declining 6.34% at $58.84. Prices partially recovered above $60 but were volatile. These reductions in oil prices could increase the cost of living all over the world, from petrol and heating to manufacture and transportation. Nations such as Nigeria, which budgeted for $75 per barrel in its 2025 budget, now have a pending fiscal crisis as oil revenues dwindle.