Name: What are Trump’s tariffs and is the US in a trade war with China? | BBC News
Uploaded: 2025-04-12T09:45:45.000Z
Duration: 25 min 39 s
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Well, hello, and welcome to Trump's Tariffs Explained with me, Ben Brown, here in London.

And me, Sumi Somaskanda, here in Washington.

In the next 30 minutes, we're going to be asking and hopefully answering some of the key questions about the Trump tariff rollercoaster of the last few days.

Yeah, why, for example, did he impose them with such flourish last week, only to then put them on pause just a few hours after they actually came into effect?

Was it a retreat forced on President Trump by the turmoil that we've seen, especially in the crucial bond markets, or was it his strategy all along, as the White House has been suggesting, successfully driving dozens of countries to the negotiating table?

And there may have been a rollback on American tariffs for the rest of the world, but why has Donald Trump doubled down on China with even steeper tariffs?

In fact, the White House confirming today that the tariff rate for China is now 145 percent, a staggering number.

So are we now witnessing an all-out trade war that is escalating at dizzying speed between the two biggest economies in the world, China and America?

And if we are, which of them will blink first?

With President Trump changing up tariffs over the last few days, let's take stock, Ben, of where we are right now.

The highest U.S. tariffs in a period on pause for three months rolled back to a base of 10 percent for most of the countries in the world, except China, which now, as we just mentioned, has that 145 percent tariff on the products it sells in the United States, while in return, China has put tariffs of 84 percent on products coming in from America.

By the way, the original higher tariffs of 25 percent on Mexico and Canada, we understand at this point, still stand.

Also, tariffs of 25 percent are still in place on all aluminum and steel imported to the United States.

Well, as far as the European Union is concerned, it has now put on hold its planned retaliatory tariffs against the United States in return for the olive branch that was offered by Donald Trump.

The EU has now held out an olive branch of its own.

Well, when it came, President Trump's spectacular U-turn on tariffs did come as a surprise.

But what forced him into that apparent climbdown?

Many financial experts believe it was the turmoil on the all-important bond market, which was dramatically increasing America's long-term borrowing costs on its national debt of more than 30 trillion dollars.

Well, let's talk to Darshini David then, who is our deputy economic senator with me in the studio.

Well, two questions, really, I suppose, Darshini.

What did force that retreat by Donald Trump?

Is this essentially now a bilateral trade war between America and China?

Gosh, big questions there, Ben, and we've only got a little bit of time to answer them as well.

Now, he talked about the markets being queasy.

He meant the bond markets, of course, that the bonds being the things that governments use to borrow money on financial markets.

Now, they're normally seen as a very safe haven for investors in times of strife, so governments only have to offer a very low interest rate on them.

What we saw happening in the last couple of days is a lot of sellers actually in that market, a lot of people offloading those bonds, which caused some alarm and some questions about financial stability in the U.S. potentially further down the line.

So therefore, many are thinking that that actually spooked the President.

Also, a big holder of those bonds is China.

So was China actually retaliating in that way?

So has he tried to slow the markets down by announcing this pause?

You heard that phrase, it's all about the art of the deal.

But let me tell you, when you talk to businesses out there, what they actually say is that he's created this vacuum now in which uncertainty is thriving and therefore they're paralyzed by fear and anxiety.

Do they actually get the kind of machinery, upskill workers in the way the President wants to guarantee the long-term success of America?

Or frankly, will they be wrong-footed in perhaps maybe a matter of not days, but hours?

So if that was actually his aim, then quite frankly, it may be backfiring.

And on China, I mean, these tariffs were 125%.

The White House say actually the total when you take into consideration earlier tariffs of 20%, it all adds up to 145.

I mean, it's whopping, it's eye-watering, whatever numbers you look at.

And we are in this trade war now between the United States and China, the two biggest global economic powers.

What are the consequences of that for the rest of the world?

Huge, Ben, in a sentence, or in a word, rather.

Do you remember that phrase, conscious uncoupling?

I think it was Gwyneth Paltrow who used it about her divorce many years ago.

China and the US between them account for a third of global goods, right?

So you've got this, basically this separation between the two of them getting deeper and deeper and deeper.

And as a result of that, what you're seeing is disruption on either side.

Now, we're hearing all sorts of reports about Chinese companies rushing to try and relocate production, for example, or figure out how much extra they can charge American consumers without, frankly, going bust.

And that can cause all sorts of disruption given the global nature of supply chains, given that these companies sell all over the world to buyers around the world too.

American consumers account for one in six, seven dollars of all of those spent in the world.

So if they're not buying, other countries aren't selling.

So this may look like it's kind of slightly, you know, over there, thousands of miles away from many countries, and there's a pause elsewhere.

But let's not forget, there are some severe consequences that many are going to feel in the weeks and months to come.

All right, Darshini, for the moment, thank you very much indeed.

Darshini David there, our Deputy Economics Editor.

All right, we have been watching the dramatic ups and downs of financial markets.

So let's take stock of where things stand.

Financial markets in Asia and Europe, they have made gains reflecting relief at Donald Trump's decision to suspend those additional reciprocal tariffs for 90 days.

This is how the key European indices have closed.

In London, the FTSE 100 was up 3 percent.

In Germany, the DAX index was up 4.5 percent, while in France, the CAC 40 was up 3.8 percent.

Here in the U.S., at times, the Dow Jones was down more than 5 percent.

The S&P 500 is down more than 4.5 percent.

The Nasdaq at the moment, more than 5 percent.

And that fall contrasts with some of those really big gains that we saw made on Wednesday directly in response to Donald Trump reversing that decision to impose many tariffs on countries other than China.

So let's take a closer look at how markets are reacting to all of the twists and turns.

We can go to our North America business correspondent, Erin Delmore, who is in New York for us.

Erin, we've been speaking pretty much every day about the market's reaction to the tariff policies.

Can you characterize where things stand right now?

Sumi, gone is the euphoria from yesterday's trading session when we saw all three major U.S. indexes rally to highs, some not seen since 2020, some 2008.

And the sell-off that we're seeing on Wall Street actually cuts in half those gains from yesterday.

I want to draw a couple of goalposts for you.

So right at this moment, we're seeing the S&P down 232 points.

Now, at the session high today, it was down 103 points.

So that shows you sitting right about in the middle of the trading session today.

But I want to point out, we saw an accelerated sell-off after the White House confirmed that China's effective tariff rate had gone up to 145%.

There had been some question of whether the 125% increase was on top of the earlier issue 20% that the administration attributes to policing the fentanyl crisis.

So when we saw news that it was going to be 145% on China, we saw stocks sink even lower.

Now, hear the president talk about strategy, because, Sumi, that is what investors want to hear.

He said that there was going to be a transition cost.

He said that there were going to be even transition problems.

So investors want to know, is the transition problem the gains that have been sliced off yesterday's rally, or are there more to come?

And that uncertainty has everybody on pins and needles here.

Our North America business correspondent, Aaron Delmore, in front of the New York Stock Exchange there.

Well, Darshini, our Deputy Economics Editor, is still with me.

We were hearing Donald Trump talking to his cabinet about there will be a transition cost to all of this, his tariffs policies.