China is striking back with additional tariffs of 34 per cent on US goods, escalating a trade war that has fed fears of a recession and caused stock markets to plunge.

In the stand-off between the world’s two biggest economies, China also announced controls on exports of some rare earths, while Trump doubled down as well, vowing not to change course.

China added 11 US bodies to the “unreliable entity” list, which allows China to take punitive actions against foreign entities, including firms linked to arms sales to democratically governed Taiwan which China claims as part of its territory.

Other affected countries like Canada have also readied retaliation in a mounting trade war after Trump raised US tariff barriers to their highest level in more than a century, leading to a plunge in world financial markets.

Investment bank J.P. Morgan said it sees a 60 per cent chance of the global economy entering recession by year-end, up from 40 per cent previously.

Wall Street fell sharply on Friday morning, after China announced its retaliatory tariffs a day after the Trump administration’s sweeping levies knocked off $US2.4 trillion ($3.8 trillion) from US equities.

Shares of big tech stocks fell, helping to drive the Nasdaq toward a bear market.

Companies with big exposure to China and Taiwan for manufacturing their products were hard-hit, with Apple down 4.7 per cent and Nvidia down 3.4 per cent.

The Nasdaq showed a 3.69 per cent decline, bringing the index to 20 per cent below its all-time closing high in December.

“This is significant and is unlikely to be over, hence the negative market reactions,” said Stephane Ekolo, Market & Equity Strategist, Tradition, London.

“Investors are afraid of a ‘tit for tat’ trade war situation.”

The Australian share market has fallen to an eight-month low, with more than $97 billion wiped from its top 500 stocks in two days.

Federal Reserve chair Jerome Powell said on Friday that the tariffs were “larger than expected” and elevated the risk of both higher inflation and slower growth.

In prepared remarks at a conference, Powell did not address the swoon in US stocks directly but acknowledged that the same uncertainty engulfing investors and company executives was facing the Fed.

Trump’s team has played down the market turbulence as an adjustment that would prove beneficial in the long run.

The White House touted stronger-than-expected job data on Friday, after a Labor Department report showed the US economy added far more jobs in March than predicted.

But Trump’s sweeping import tariffs could test the labour market’s resilience in the months ahead amid sagging business confidence.

“To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!” Trump said in a social media post in all caps.

After China’s retaliation, he posted: “China played it wrong, they panicked – the one thing they cannot afford to do!”

TikTok lever

President Trump has extended by 75 days a deadline for Chinese technology company ByteDance to sell US assets of popular short video app TikTok to a non-Chinese buyer or face a ban that was supposed to take effect in January under a 2024 law.

On Thursday, local time, Trump said he looked forward to working with China and making a deal over TikTok by providing relief for US tariffs on Chinese goods in exchange for Beijing officials’ approval of the sale.

Speaking to reporters on Air Force One, Trump said it was just an example and did not answer a question on whether plans were underway for him to talk to Chinese President Xi Jinping.

Starmer, Albanese call

UK Prime Minister Keir Starmer has spoken to his Australian and Italian counterparts about the approach to US tariffs, saying they agreed an “all-out trade war would be extremely damaging”.

In separate calls, the United Kingdom leader said it had been “clear for a long time that like-minded countries must maintain strong relationships and dialogue to ensure our mutual security and maintain economic stability,” a spokesperson from his office said in a statement.

“They all agreed that an all-out trade war would be extremely damaging and is in nobody’s interests, while agreeing to keep in close contact in the coming days.”

Issuing a readout of the separate discussions on Friday, a Downing Street spokesperson said Starmer “has been clear the UK’s response will be guided by the national interest” and officials will “calmly continue with our preparatory work, rather than rush to retaliate”.

“He discussed this approach with both leaders, acknowledging that while the global economic landscape has shifted this week, it has been clear for a long time that like-minded countries must maintain strong relationships and dialogue to ensure our mutual security and maintain economic stability,” the spokesperson added.

Rubio denies crash

US Secretary of State Marco Rubio on Friday disputed any economic crash, telling reporters that markets were reacting to the change and would adjust.

“Their economies are not crashing. Their markets are reacting to a dramatic change in the global order in terms of trade,” he said at a press conference in Brussels.

“The markets will adjust.”

With European shares also tumbling to the biggest weekly losses in years, the European Union’s trade commissioner Maros Sefcovic will speak to US counterparts.

“We will not shoot from the hip – we want to give negotiations every chance to succeed to find a fair deal, to the benefit of both sides,” he said on social media.

Nintendo pause

Nintendo says it will no longer open pre-orders for the Switch 2 in the United States next week, following the introduction of a 24 percent reciprocal tariff on exports from Japan.

“Pre-orders for Nintendo Switch 2 in the U.S. will not start April 9, 2025 in order to assess the potential impact of tariffs and evolving market conditions,” Nintendo said in a statement on Friday.

The console, with a larger and higher quality screen as well as new magnetic detachable controls, is due for release on June 5.

Nintendo said the new console would also come with a range of new social features, centred around a new tool called GameChat which allows players to voice or video chat with friends while playing.

Ausie wines risk

US tariffs on Australian wine could deal a major blow to entry-level exports, with the industry fearing prices will rise enough to risk a key market being swallowed up by bulk American wine.

The blanket 10 per cent tariff on all wine sent to the US – which is the nation’s third-biggest export market – will have a profound impact on a sector still struggling after three years of Chinese tariffs, Taylors Wines managing director Mitchell Taylor said.

“The trade minister rang me and pointed out how we did very well, relatively, but the industry has been going through … the most difficult time in the 40 years I’ve been in it,” the South Australian winemaker said.

About 80 per cent of the wine going into the US market is entry level, and the 10 per cent tariff “multiplies all the way up the alcohol distribution chain” according to Taylor.

“All of a sudden, the $5-7 bottles will be up over $10 and the excess, cheap California wine will just come in and swallow up that market,” he said.

Australia exported $325 million of wine to the US in 2024, according to Wine Australia.

DMG Fine Wine managing director William Dong said there was relief that the tariffs were not 20 per cent-plus as the industry had feared.

Yet it will still greatly impact entry-level wine producers as the market becomes more price-sensitive and consumers cut back on spending, he said.

Australia was in a better position than markets such as Europe where the tariff levels imposed are much higher, according to Dong.

“Consumers will be open to exploring more affordable alternatives that still deliver quality and provenance. We have a unique opportunity to provide that and gain a foothold in the market,” he said.

—with AAP