The News
Stocks surged Wednesday after US President Donald Trump announced a 90-day tariff reprieve for most countries, even as he ramped up import duties on China to 125%.
White House officials said the level for other countries, scores of which have sought negotiations with Washington since Trump first announced his tariff regime, will be brought down to a universal 10% rate during the pause. That includes Mexico and Canada, which Trump had previously exempted from his across-the-board 10% tariffs.
Trump said in a Truth Social post that he was raising the duties on Chinese imports to 125% effective immediately “based on the lack of respect that China has shown to the World’s Markets.”
Republican lawmakers and investors were growing increasingly restive about the potential for an economic downturn if Trump kept tariffs in place, and many of them cheered the pause. The S&P 500 made its biggest intraday move since 2020, surging more than 7%, while the Nasdaq rose almost 9%.
“The world is ready to work with President Trump to fix global trade, and China has chosen the opposite direction,” Commerce Secretary Howard Lutnick said in a post on X after the pause was announced.
SIGNALS
Uncertainty, risk of US economic downturn remains high
Donald Trump’s tariff regime had raised many economists’ expectations of a recession this year, and even though stocks surged Wednesday after the pause announcement — causing Goldman Sachs to revert to a no recession prediction — analysts warned that the lingering uncertainty over future tariff decisions would limit investments. “There’s still a high likelihood that tariffs against China will create a recession and another collapse in stocks,” a Bloomberg columnist said. The uncertainty around Trump’s trade policy going forward makes it almost impossible for businesses to plan future investments, The Atlantic’s Derek Thompson argued: “Rather than increase confidence in financial markets to encourage long-term investment in U.S. manufacturing, [Trump has] unleashed chaos.”
Beijing and Washington face a tariff impasse
Beijing has shown no sign of conceding to Donald Trump, with a Chinese spokesperson on Wednesday describing the president as “arrogant and bullying.” The escalation raises the prospect of an economic divorce between the two superpowers: Bloomberg estimated that even 100% tariffs would virtually wipe out US imports of Chinese goods altogether. “It’s not Trump’s intention. It’s not China’s intention. But if they won’t bargain with him for perfectly understandable reasons, we’re going to end up decoupling,” one analyst said. Some US companies like Apple were already looking to shift some manufacturing out of China to other countries like India; Trump’s pause on the heavy tariffs he put on key Asian manufacturing hubs such as Vietnam could speed that exodus.
Questions swirl around what Trump hopes to achieve
The 90-day pause has amplified already swirling questions around what the White House is aiming to achieve. Trump officials have repeatedly said that the duties will kickstart US manufacturing, bring in billions in government revenue, and lead to better trade deals for Washington — objectives that now appear undermined, and at odds with one another. “In the end, there are just too many contradictions in the Trump worldview to warrant any talk of a grand plan,” the Financial Times’s Janan Ganesh argued. The mixed messaging reflects ideological disagreements among Trump’s trade team, as Semafor previously reported. What Trump has accomplished, The Atlantic’s David Frum argued, is to demonstrate that “America’s word was not good, that American credit could not be trusted.”