China Just Shut Down the U.S. Trade Route–Now What?

China just fired its heaviest shot yet in the trade war: a blanket tariff hike to 125% on all U.S. imports. The move came after Trump jacked up duties on Chinese goods to 145%a level so high it essentially makes trade between the two economic superpowers nonviable. Tesla (NASDAQ:TSLA), Apple, and other multinationals with deep China exposure are suddenly looking at a world where their supply chains and end markets may be toast. Markets didn’t wait to reactS&P 500 (SPY) futures slipped, the dollar dropped, and the yuan wobbled before regaining ground.

But here’s the twist: Beijing says this is it. No more tit-for-tat. No more playing Trump’s tariff numbers game. China’s calling the strategy a joke, refusing to retaliate further, and instead pivoting to diplomacy. Xi Jinping is already rallying global alliesEurope, ASEAN, the Gulf nationsand restarting talks with Brussels over long-frozen trade spats. Meanwhile, Hollywood films, U.S. travel, and even study abroad in Ohio are getting caught in the crossfire. This isn’t just a trade dispute anymore. It’s a full-spectrum economic standoffgoods, services, people, culture.

For investors, this is the moment to pay attention. We’ve officially entered uncharted waters. With tariffs averaging over 130% on both sides, decoupling is no longer a talking pointit’s happening. Companies built on the assumption of stable U.S.-China trade are now facing a tectonic shift. Supply chains are under review. Market strategies are being rewritten. And with Beijing framing itself as the adult in the room, global sentiment may tilt eastward. The U.S.-China trade corridor is closing fast. The smart money? It’s already looking for the next door.

This article first appeared on GuruFocus.