On Friday, Beijing raised tariffs on US imports to 125 percent in a forceful response to President Donald Trump’s latest move to increase duties on Chinese goods to 145 percent, deepening a trade conflict that has rattled global markets and disrupted supply chains.

The retaliatory measure marked a sharp escalation in the tariff war between the world’s two largest economies, fuelling fears of a global recession. Markets reacted swiftly—global stocks fell, the dollar weakened, and US Treasury bonds were sold off heavily, reflecting a renewed flight to safety. Gold prices surged to an all-time high.

“Recession risk is much, much higher now than it was a couple of weeks ago,” said Adam Hetts of Janus Henderson. In Europe, the STOXX 600 index dropped over 1 percent, adding to one of its most volatile trading weeks since the pandemic outbreak.

Despite the turmoil, US Treasury Secretary Scott Bessent maintained that fresh trade agreements—such as newly announced talks with Vietnam—would bring longer-term stability. Hanoi, a growing manufacturing hub, pledged to curb transshipment of Chinese goods to bypass US tariffs.

In Asia, Japanese Prime Minister Shigeru Ishiba formed a trade task force to discuss developments with Washington.

China’s finance ministry hinted this could be its final matching response to US hikes. “Further tariff increases would no longer have economic significance,” the ministry said, though it warned of alternative forms of retaliation.

President Xi Jinping, speaking with Spanish Prime Minister Pedro Sanchez, condemned “unilateral acts of bullying” and urged EU cooperation to uphold global trade rules.