Investors dumped US government bonds, the dollar tumbled and stocks seesawed after Beijing's retaliation against Trump deepened concerns on already traumatized global markets.
Trump sent financial markets into a tailspin by announcing sweeping import taxes on dozens of trade partners last week, only to abruptly roll them back to 10 percent on Wednesday for 90 days -- while raising levies on goods from China.
"We are doing really well on our tariff policy," Trump said in a post on his Truth Social network after China announced its latest hike.
"Very exciting for America, and the World!!! It is moving along quickly," he wrote.
The White House said later that Trump remained "optimistic" about a deal with China, and added that 15 other countries have offers "on the table" during his 90-day pause in their tariffs.
But Press Secretary Karoline Leavitt added that "the president made it very clear, when the United States is punched he will punch back harder."
The US and Beijing have been trading salvos of increasingly harsh tariffs since last week.
Chinese President Xi Jinping gave his first major comments on the tensions on Friday, with state media quoting him as saying his country was "not afraid."
Xi also said the European Union and China should "jointly resist unilateral bullying practices" during talks with Spain's Prime Minister Pedro Sanchez.
- 'Numbers game' -
Beijing announced after Xi's comments that new tariffs of 125 percent on US goods would take effect Saturday -- almost matching the staggering 145 percent level imposed on Chinese goods coming into America.
A Chinese Commerce Ministry spokesperson said the United States bore full responsibility, deriding Trump's tariffs as a "numbers game" that "will become a joke."
But China's finance ministry said tariffs would not go any higher in an acknowledgement that almost no imports are possible at the new level.
Trump had reiterated on Thursday that he was looking to do a deal with Xi despite the mounting tensions.
"He's been a friend of mine for a long period of time. I think that we'll end up working out something that's very good for both countries," he told reporters.
But American officials have made it clear they expect Xi to reach out first.
Pressure was growing on Trump, however, as markets continued to fret.
As investors fled the dollar, which is typically considered a key haven currency, Trump attempted to squelch fears on Friday.
"We're the currency of choice. We're always going to be... I think the dollar is tremendous," Trump told reporters aboard Air Force One, after the dollar plunged to its lowest level against the euro in more than three years.
Meanwhile yields on crucial US government bonds, which are normally seen as a financial refuge, were up again Friday, indicating weaker demand as investors take fright.
The White House said however that it had no evidence to support speculation by traders that China was offloading some of its vast holdings -- which would increase the cost of borrowing for the US government -- in retaliation.
Wall Street stocks finished higher Friday, concluding a rollercoaster week on a positive note amid hopes that the market has absorbed the worst headlines about trade conflicts.
Policymakers at the US Federal Reserve meanwhile warned of higher inflation and slower growth ahead due to Trump's tariff policy.
- 'Countermeasures' -
Economists warn that the disruption in trade between the tightly integrated US and Chinese economies will increase prices for consumers and could spark a global recession.
Ipek Ozkardeskaya, an analyst at Swissquote bank, told AFP the tariff figures were "so high that they don't make sense anymore," but said China was "now ready to go as far as needed."
The rest of the world is still calibrating its response.
Trump on Thursday described the European Union -- which was originally hit with 20 percent tariffs by Trump -- as "very smart" for refraining from retaliatory levies.
EU trade chief Maros Sefcovic will hold talks in Washington on Monday.
But the 27-nation bloc's chief Ursula von der Leyen told the Financial Times it remained armed with a "wide range of countermeasures" including a possible hit on digital services that would strike US tech firms.
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