Trump's Trade Tariff Drama: Global Markets Surge as President Announces 90-Day Pause, Hikes China Duties to 125%
In a dramatic shift that sent global markets soaring, President Donald Trump announced on Wednesday a 90-day pause on his controversial "reciprocal" tariffs for more than 75 trading partners, while simultaneously raising tariffs on Chinese imports to an unprecedented 125%. This latest development in the escalating trade tensions has triggered significant market reactions and raised questions about the future of global trade relations.
Trump's Surprising Reversal: The 90-Day Pause
President Trump took to Truth Social on Wednesday to announce a significant modification to his tariff strategy that had initially sent markets into turmoil when first imposed. "I am pausing my tariffs regime for 90 days on more than 75 trading partners who did not retaliate," Trump wrote NBC News1.
The pause applies to countries that engaged directly with the administration following the implementation of the initial tariffs. According to White House officials, the pause was granted to nations that called to discuss trade-barrier issues, indicating a willingness to work with the U.S. on global trade matters NBC News1.
However, a 10% duty across-the-board will remain in place for these countries during the 90-day period, and that duty will also apply to Canada and Mexico, according to White House confirmations NBC News1.
Treasury Secretary Scott Bessent explained that the pause was strategic, saying Trump would be "personally involved in negotiating trade deals with individual countries, which would be 'bespoke' and tailored for each nation," adding that the President created "maximum negotiating leverage" The Washington Post2.
China in the Crosshairs: 125% Tariff Hike
The pause, however, explicitly excludes China, which instead faces an immediate increase in tariffs to 125%. "Based on the lack of respect that China has shown to the World's Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately," Trump stated NBC News1.
The tariff increase on China comes after Beijing had already announced its own retaliatory measures earlier in the day. China said it would raise its tariffs on U.S. products to 84%, up from its previously announced 34%, in response to the initial U.S. tariffs of 104% CBS News3.
China's Ministry of Foreign Affairs spokesman Lin Jian criticized Trump's tariffs as "unilateralism, protectionism and economic bullying," stating that the U.S. decision to add another 50% tariff was a "mistake upon a mistake" CBS News4.
Beyond the tariff increase, China also added 11 American companies to an "unreliable entities" list, barring Chinese firms from selling these companies dual-use goods, including items that could have military applications CBS News4.
Market Reaction: A Dramatic Rebound
The announcement of the tariff pause triggered a remarkable rally in global markets that had been experiencing significant volatility since the initial tariff announcements. Major U.S. stock indices surged dramatically:
- The S&P 500 climbed nearly 8%
- The tech-heavy Nasdaq Composite rallied approximately 10%
- The Dow Jones Industrial Average rose over 7%, representing more than 2,500 points
- The Russell 2000 small-cap index jumped more than 7%
Yahoo Finance5
Technology stocks were among the biggest gainers, with the tech sector leading the market rebound. Chip stocks in particular saw substantial increases, with companies like Nvidia and Broadcom up about 13%, AMD and Intel each gaining 14% or more, and Arm rising 17% Yahoo Finance5.
Bond markets also reacted strongly, though with concerning signals earlier in the day. The 10-year Treasury yield had surged to 4.5% before retreating somewhat after the tariff pause announcement, indicating a significant sell-off of U.S. government debt The Washington Post2.
Commodities saw mixed reactions, with gold futures rising around 3% to hover near $3,080 per ounce, while crude oil prices increased with West Texas Intermediate rising over 2.5% to trade above $61 a barrel Yahoo Finance5.
European Union Responds with Countermeasures
Despite the pause, the European Union moved forward with retaliatory measures against the United States. On Wednesday, the EU voted to impose fresh duties on U.S. imports, with tariffs ranging from 15% to 25% targeting approximately $23 billion worth of U.S. goods The Washington Post6.
These EU tariffs, set to take effect starting on April 15, will hit a range of U.S. products, including soybeans, motorcycles, orange juice, and other goods, with a focus on products from Republican states The Guardian7.
It remains to be seen whether the 90-day pause will affect the EU's implementation of these measures, as European officials have yet to respond to Trump's latest announcement.
Economic Implications: Recession Fears and Growth Predictions
Economists and financial analysts have expressed significant concerns about the economic implications of the escalating trade tensions, particularly regarding the heightened tariffs on China.
J.P. Morgan raised its forecast of the global economy entering a recession by year-end from 40% to 60%, with warnings that the tariff war could lead to permanently higher inflation and reduced output TIME8.
For China specifically, Goldman Sachs predicted that Trump's tariffs could drag down China's GDP by as much as 2.4 percent, forecasting 4.5 percent growth for 2025 compared to the Chinese government's target of 5 percent. UBS analysts were even more pessimistic, suggesting that growth might drop to just 4 percent if significant fiscal stimulus is required Al Jazeera9.
The impacts are expected to extend beyond China and the U.S., particularly affecting manufacturing hubs in Southeast Asia such as Vietnam, Cambodia, and Bangladesh, which were hit with 46%, 49%, and 37% tariffs respectively before the pause announcement TIME8.
China's Potential Economic Response
In response to the increased tariffs, analysts predict China will implement various measures to offset the economic impact. These likely include:
- Further reductions in already low interest rates
- Increased borrowing by local governments
- Financial assistance for affected export workers
- Strengthening trade ties with other partners, particularly in the Global South
- Possibly allowing the yuan to depreciate to improve export competitiveness
- Strong intervention in stock markets to prevent financial shocks
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Chinese exports to the U.S. are expected to be severely affected as the 125% tariff will more than double the cost of Chinese goods in the U.S. market. Moreover, China's traditional tactic of rerouting exports through countries like Vietnam and Thailand to bypass U.S. tariffs will become less effective now that Trump has erected global trade barriers Al Jazeera9.
Expert Analysis and Concerns
Economic experts have expressed varying degrees of concern about the long-term implications of these trade policies.
Economist Larry Summers warned about the potential repercussions for the U.S. economy, stating, "For a country with our scale of deficits and debt, aversion to our government debt is a potentially grave thing. This kind of pattern is quite normal for emerging markets — not for superpowers" The Washington Post2.
Truist co-CIO Keith Lerner told Yahoo Finance that "the market knows that [earnings] cuts are coming," implying that many negative expectations might already be priced into the market. However, other analysts have noted that companies are entering the earnings season with "super low expectations" Yahoo Finance5.
The bond market's reaction, with investors selling off what are normally considered safe-haven assets, signals deeper concerns about U.S. fiscal stability. Some experts have drawn parallels to the financial crisis that unfolded in the United Kingdom in 2022 under Prime Minister Liz Truss The Washington Post2.
What's Next for Global Trade?
As the 90-day pause begins, all eyes will be on the negotiations between the U.S. and its trading partners. Treasury Secretary Scott Bessent indicated that Trump would be personally involved in negotiating "bespoke" trade deals with individual countries during this period The Washington Post2.
Meanwhile, China's response to the 125% tariff increase will be closely monitored for further retaliatory measures or potential economic impacts. Some countries have already begun negotiating with the U.S.—Vietnam, for example, reportedly offered to reduce its tariffs on U.S. products to 0% TIME8.
The Federal Reserve's perspective will also be crucial, as minutes from their March meeting may reveal how worried policymakers were about stagflation risks from Trump's tariff policies Yahoo Finance5.
Conclusion: Uncertainty Remains Despite Market Rally
While global markets have responded positively to Trump's tariff pause announcement, significant uncertainties remain about the long-term economic consequences of the escalating trade tensions with China and the potential for renewed volatility after the 90-day period expires.
As François Picard's panel at France 24 questioned, "Will it be enough to ease markets in the long run?" and "Who between China and the United States has the stamina to win this fight between the world's top manufacturer and its number one customer?" France 2410.
The coming months will be critical in determining whether this pause represents a genuine shift toward more nuanced trade policies or merely a temporary reprieve in what could become a prolonged global trade war with far-reaching economic consequences.
The world now watches as the U.S. and its trading partners navigate these troubled waters, with billions of dollars in global trade and potentially the stability of the world economy hanging in the balance.
