China is closely monitoring the implications of President Donald Trump’s new 15% universal tariff on all imports and will decide “in due course” whether to adjust countermeasures, a commerce ministry official said Tuesday, a day after Trump raised the temporary levy from 10% to 15% under Section 122 of the 1974 Trade Act.

According to Reuters, the official reiterated Beijing’s opposition to unilateral tariffs and urged the United States to “cancel unilateral tariffs and refrain from further imposing such tariffs.” At the same time, the ministry expressed willingness to hold “frank consultations” during the sixth round of U.S.-China economic and trade talks, without specifying timing or location.

Trump’s latest move came in direct response to the U.S. Supreme Court’s 6-3 ruling Friday invalidating his prior use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs. That decision dismantled duties of 10–50% on goods from dozens of countries, including a 20% rate on Chinese imports. The court held that IEEPA does not authorize unilateral import taxes absent a specific, imminent foreign threat.

Imports from China had been subject to the 20% IEEPA tariff (10% reciprocal + 10% fentanyl-related). The Supreme Court ruling implies a net reduction of around 5% in effective tariffs on Chinese goods, according to Goldman Sachs analysis. Global Trade Alert estimates China’s trade-weighted average tariff rate drops 7.1 percentage points under the new Section 122 regime — one of the largest relief effects among major U.S. trading partners.

China’s Retaliatory History and Current Posture

Beijing imposed multiple rounds of counter-tariffs on U.S. goods in 2025, targeting agricultural commodities (soybeans, pork, cotton), energy (LNG, crude oil), and industrial products. It also leveraged its dominance in rare earths to restrict exports of critical minerals, causing supply-chain disruptions in U.S. manufacturing.

Most retaliatory measures were suspended in November 2025 after a trade truce negotiated by Presidents Trump and Xi Jinping in South Korea. That agreement included a U.S. pledge to postpone a sweeping rule barring shipments to thousands of Chinese firms and China’s commitment to certain market-access concessions.

The commerce ministry’s measured tone on Tuesday suggests Beijing intends to preserve the truce while preparing contingency options. Analysts see the 5–7 percentage point effective tariff relief as reducing immediate pressure on Chinese exporters, though the new 15% baseline still exceeds pre-2025 levels for many goods.

Upcoming Trump-Xi Summit in Focus

Trump is scheduled to visit Beijing from March 31 to April 2, 2026 — his first trip to China since 2017 — for highly anticipated talks with President Xi. Xi is also expected to make a state visit to Washington later in the year. The Supreme Court ruling weakens Trump’s tariff leverage at a critical moment.

Analysts say China is likely to:

• Push for removal of remaining 10% fentanyl-linked tariffs.
• Seek easing of technology export controls on advanced chips and semiconductor equipment.
• Press for reduced U.S. support for Taiwan, including arms sales and official contacts.
• Demand removal of certain Chinese entities from U.S. sanctions lists.

Xi asserted during a recent phone call that Taiwan is “the most important issue” in U.S.-China relations. Minxin Pei of Claremont McKenna College predicts Xi may offer concessions on U.S. agricultural and energy purchases in exchange for a statement on Taiwan that Beijing could portray as a diplomatic victory.

Scott Kennedy of the Center for Strategic and International Studies noted the ruling has “limited impact” on the overall U.S.-China relationship because “China had already gained the upper hand.” He expects the April summit to yield modest outcomes — perhaps an extension of the truce and increased U.S. product sales — but little progress on structural issues like technology controls or economic rebalancing.

U.S. Contingency Plans and Ongoing Probes

USTR Jamieson Greer defended the continuity of existing trade deals, insisting the ruling affected only IEEPA-based tariffs. The administration has launched new Section 301 investigations covering pharmaceuticals, industrial overcapacity, forced labor, digital services taxes, and discrimination against U.S. tech and digital goods — signaling a shift to more targeted tools.

Trump warned on Truth Social of additional tariffs in the coming months under alternative authorities. The temporary 15% levy expires in 150 days unless Congress approves extensions or new legislation.

The coming weeks will test whether diplomacy can stabilize U.S.-China ties — or whether renewed tariff battles under alternative authorities reignite global trade tensions. With the April summit looming, both sides are maneuvering carefully: Trump seeks commercial wins and leverage on fentanyl and trade deficits, while Xi prioritizes Taiwan and technology access.

The Supreme Court’s intervention has reshaped the negotiating table, giving China a stronger hand on core geopolitical issues while forcing the U.S. to adapt its tariff strategy. The outcome will likely influence not only bilateral trade flows but also the broader trajectory of U.S.-China relations in 2026 and beyond.

Mark Zandi warns that elevated valuations, rising speculative behavior, and fragile Treasury market dynamics could combine to trigger a sell-off severe enough to spill from Wall Street into the broader U.S. economy.

The U.S. stock market has wavered in 2026 as investors juggle tariff uncertainty, artificial intelligence–driven volatility, and persistent inflation pressures. But for Mark Zandi, chief economist at Moody’s Analytics, the risks extend well beyond routine market swings.

Zandi, whose commentary typically centers on macroeconomic fundamentals rather than equity price action, said recent developments have pushed him to issue an unusually direct warning. In a thread on X, he argued that markets may be entering a destabilizing phase in which asset prices detach from underlying economic performance.

“There are times when I feel markets are overdone and increasingly disconnected from the economy,” Zandi wrote. “Markets risk moving in a big way, causality is reversed, and falling asset prices threaten an already vulnerable economy. This is one of those times.”

Speculation and stretched valuations

Zandi’s concern begins with valuations. By conventional metrics such as price-to-earnings ratios and equity risk premiums, U.S. stocks remain elevated relative to long-term averages. Investors have justified these levels with expectations of productivity gains from artificial intelligence and resilient corporate earnings.

Zandi does not dispute the existence of supportive fundamentals. However, he argues that speculative momentum is increasingly driving price formation.

“Valuations are high,” he wrote. “There are good fundamental reasons for this, but markets appear increasingly tainted by speculation. That is, investors are simply investing on the faith that prices will rise quickly in the future because they have in the recent past.”

Such dynamics can amplify volatility. When prices rise primarily because of price trends — rather than incremental improvements in earnings, productivity, or cash flow — they become more sensitive to negative shocks. A policy surprise, geopolitical escalation, or weaker-than-expected data release can quickly reverse sentiment.

Risk not confined to equities

Zandi’s warning is notable because he does not limit the vulnerability to equities or other traditional risk assets. He also flagged safe-haven assets, including gold and silver, that have rallied amid geopolitical uncertainty and concerns over fiscal sustainability. He included cryptocurrencies in the same broad risk category.

The implication is that asset inflation may be systemic rather than sector-specific. In such an environment, diversification provides less protection if liquidity conditions tighten or investor psychology shifts broadly toward risk aversion.

Mixed macro backdrop

At the core of Zandi’s thesis is what he characterizes as a fragile macroeconomic foundation.

Real gross domestic product is expanding slightly above 2%, according to recent data, below his estimate of the economy’s potential growth rate of roughly 2.5%. Employment growth has slowed, and he noted that the unemployment rate has been edging higher. Inflation, measured by the Federal Reserve’s preferred personal consumption expenditures (PCE) index, remains near 3%, a level he described as “stubbornly and uncomfortably high.”

This combination — modest growth, softening labor markets, and persistent inflation — limits policy flexibility. If growth slows further, the Federal Reserve faces pressure to ease monetary policy. If inflation remains elevated, rate cuts could risk reigniting price pressures.

Treasury market fragility

Zandi also pointed to a less discussed vulnerability: the structure of demand in the U.S. Treasury market.

The Treasury market is widely viewed as the global risk-free benchmark, anchoring mortgage rates, corporate borrowing costs, and sovereign debt pricing worldwide. However, Zandi expressed concern about the growing role of leveraged institutional investors, including hedge funds, in absorbing supply.

While he praised the appointment of Kevin Warsh to lead the Federal Reserve, he cautioned that concentrated or leveraged participation in Treasurys could amplify volatility if sentiment shifts.

Suppose hedge funds and other nontraditional buyers were to retreat simultaneously — whether due to economic fears, margin calls, or regulatory shifts — Treasury prices could fall sharply. Because yields move inversely to prices, such a move would push interest rates higher across the curve.

The transmission to the real economy would be direct. Higher Treasury yields raise mortgage rates, increase borrowing costs for businesses, and pressure equity valuations by increasing discount rates applied to future earnings. For households, that could translate into weaker housing demand and slower consumption, and could curtail capital investment and hiring for corporations.

Feedback loop risk

Zandi’s most serious warning concerns what economists describe as a negative feedback loop. In normal conditions, asset prices respond to economic fundamentals. In stressed environments, the relationship can invert: falling asset prices weaken economic activity, which then justifies further declines in asset prices.

Such episodes are rare but consequential. They typically require three elements: elevated valuations, economic vulnerability, and concentrated or leveraged financial positioning. Zandi suggests all three may be present.

The current market environment is not in crisis. GDP continues to grow, inflation is below its 2022 peak, and financial institutions remain well capitalized by regulatory standards. Yet Zandi’s argument is that the margin for error is narrowing.

In his assessment, the greater risk lies not in a gradual slowdown but in a rapid repricing of assets that tightens financial conditions faster than policymakers or markets anticipate. If that occurs, Wall Street volatility could migrate to Main Street through higher borrowing costs, weaker hiring, and slower income growth.