The opinions expressed here are those of the author, a columnist for Reuters. Repeats April 10 column with no changes.

By Jamie McGeever

ORLANDO, Florida, April 10 (Reuters) - With the dust now settled on the euphoric market rebound following President Donald Trump's trade war climb-down, investors are realizing that the global economy still faces the most punishing U.S. tariffs in nearly 100 years.

The picture is marginally brighter than it was before Trump blinked at 1:18 p.m. Eastern Time on Wednesday and announced a 90-day hiatus and a reduction to 10% for most of his 'reciprocal' tariffs. Washington is now pursuing negotiations with its trading partners and most retaliatory measures have been put on ice.

But the big picture remains pretty dim.

Analysis published by the non-partisan Budget Lab at Yale on Thursday suggests U.S. consumers will face an overall average effective tariff rate of 25.3%, only "slightly different" from before Trump's pullback, and the highest since 1909. Even accounting for likely consumption shifts away from Chinese goods the average tariff rate will be 18.1%, the highest since 1934.

"It's clear the U.S. economy hasn't seen a shock like this since the 1920s and 1930s," PIMCO economist Tiffany Wilding wrote on Thursday.

She estimates that every percentage point increase in the average effective tariff rate shaves about 0.1 ppt off U.S. growth and adds a similar amount to inflation. She says U.S. recession is now likely, as is core inflation surging to 4.5%. That's a dismal picture.

TIGHTENING GRIP

By some measures, the trade war's vice-like grip on the global economy has tightened, particularly because of the pain being inflicted on China.

Essentially, any semblance of a truce in Trump's broad trade war is being offset by the ratcheting up of tensions with China. Levies on Chinese goods are now an eye-popping 145%, the White House on Thursday.

As Pictet Wealth Management's Frederik Ducrozet notes, the global trade war narrowed on Wednesday, but it also deepened. A "full decoupling" between the U.S. and China, the world's two largest economies, is playing out in front of our eyes.

Little wonder that China's stock market significantly lagged its regional and global peers on Thursday, although eking out a 1.3% rise was an achievement given the increasingly alarming U.S.-China standoff.

TD Securities strategist James Rossiter calculates that the import-weighted average U.S. tariff has actually risen to 26.2% from 23.9% on April 2, Trump's 'Liberation Day'. Of course, if U.S.-China trade collapses, as could happen if neither Washington or Beijing backs down, the average effective rate will be closer to the global 10%.

But freezing the two-way flow of nearly $600 billion in annual trade isn't exactly bullish, as investors realize - in U.S. trading hours on Thursday stocks plunged again, and 'safe-havens' like the Swiss franc, gold and short-dated Treasuries surged.

CUE THE YUAN DEVAL?

So what are China's options? Policymakers in Beijing were already facing an unenviable domestic situation - a real estate crash, deflation and moribund demand and investment - and Trump's belligerence can only make that more difficult.

If the economic battle lines between the world's two economic superpowers are being marked by tariffs, the market battle lines are being drawn by the dollar/yuan exchange rate. In bright Technicolor, too.

It's hard to envisage how China withstands or fights back against such punitive tariffs without a significant depreciation of its tightly controlled yuan, or perhaps a much bigger devaluation.

The currency market is leaning heavily that way: onshore spot dollar/yuan is a whisker from levels last seen in December 2007; Thursday's central bank dollar/yuan fixing of 7.2092 yuan was the highest since September 2023; the offshore 'CNH' dollar/yuan rate touched a record peak of 7.4287 on Tuesday.

Economists at Goldman Sachs on Thursday slashed their Chinese GDP growth forecasts to 4.0% this year and 3.5% next year from 4.5% and 4.0%, respectively. They also said that they expect "significant" monetary and fiscal policy easing from Beijing.

No matter who blinks first in the coming months – Trump or President Xi Jinping – the rest of the global economy probably won't like what it sees.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Nia Williams)

((jamie.mcgeever@thomsonreuters.com; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net/))