125% tariffs spark China retaliation fears

The U.S. decision to impose a 125% tariff on Chinese goods has intensified trade tensions and sparked warnings of economic retaliation from Beijing.

Anthony Scaramucci, founder of SkyBridge Capital, labeled President Donald Trump’s trade approach as “nonsensical,” warning it could result in severe consequences for both the U.S. and its allies.

Scaramucci outlined five likely responses from China, including a 20–40% devaluation of the yuan, a fiscal stimulus package worth $2–3 trillion, the potential sale of U.S. Treasury holdings, increased intellectual property theft, and stronger alliances with U.S. adversaries.

“It’s OK and bipartisan to take on China,” Scaramucci said.

“But it makes no sense to simultaneously antagonise global allies geopolitically and economically, driving them into China’s arms,” he added.

The trade conflict has already triggered retaliatory measures, with China raising tariffs on U.S. goods to 84%. Beijing has labeled the U.S. actions as coercive and declared it would “fight till the end.”

Analysts warn that a currency war could follow. A sharp yuan devaluation would likely ripple across global markets, destabilise exchange rates, and raise U.S. borrowing costs if China begins selling off its U.S. Treasury reserves.

The U.S. Treasury Department has pointed to the ongoing trade imbalance, citing $143.5 billion in U.S. exports to China versus $438.9 billion in imports from China as a central issue.

Economists are raising alarms over the broader economic impact.

The IMF estimates that a 20% devaluation of the yuan could shave 0.8% off global GDP growth each year through 2026.

Scaramucci’s forecast underscores the financial risks of escalating trade policies, with implications for crypto markets, equities, and global debt instruments.

With both Washington and Beijing standing firm, the prospects for near-term de-escalation remain uncertain.