Markets roar back with Trump U-turn on tariffs

WASHINGTON/ BEIJING: US President Donald Trump abruptly backed down Wednesday in his global trade war with a 90-day pause for nearly all countries, including Pakistan, but slapped even more levies against China in what has become a full-scale confrontation between the world’s two largest economies.

Following days of global market turmoil, Wall Street stocks surged in reaction to Trump´s announcement.

“I have authorised a 90-day pause” on higher tariffs that took effect on Wednesday, Trump said on his Truth Social network, saying he took the decision after more than 75 countries had reached out to negotiate and did not retaliate against the US.

Trump said the 90 days pause would allow time for US officials to negotiate with countries that have sought to reduce them.

A 10 percent blanket duty on almost all US imports will remain in place, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.

The US president’s move marked a stunning reverse from often punishing levies that hit even many of the closest US allies.

But Trump accused China of still “ripping off” his country.

“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 percent, effective immediately,” Trump said.

Trump had only hours earlier ramped up the duties on Chinese goods to a giant 104 percent. China then retaliated by rising tariffs on US imports to 84 percent from 34 percent.

“At some point, hopefully in the near future, China will realise that the days of ripping off the USA, and other countries, is no longer sustainable or acceptable,” Trump said.

The European Union had earlier launched its own counterattack, announcing measures targeting some US products from Tuesday in retaliation for American duties on global steel and aluminum exports.

The 27-nation bloc, which Trump has accused of being created to “screw” the US, would hit more than 20 billion euros’ worth ($21.9 billion) of US products, including soybeans, motorcycles and beauty products.

The EU said it would impose 25 percent tariffs on a range of US imports in a first round of countermeasures. The 27-member bloc faces US tariffs of 20 percent on most products and higher duties on autos and steel. Countermeasures in Canada, a close US ally and major trading partner, also took effect on Wednesday.

Trump announced a week ago on what he called “Liberation Day” that he would impose a 10 percent baseline tariff on all countries that took effect on Saturday, with additional rates for economies including China and the EU with a large trade surplus with the United States that took effect on Wednesday.

With markets roiled for the past week, Trump earlier Wednesday urged Americans to “be cool!” and said that “Everything is going to work out well.”

Wall Street stocks rocketed higher Wednesday after Trump’s pause announcement.

Minutes after Trump unveiled it, the S&P 500 surged 6.0 percent higher to 5,281.44, snapping a brutal run of losses over the past week.

Goldman Sachs said it was rescinding its recession forecast and reverting to its previous baseline estimate for the economy to grow in 2025. Kevin Gordon, senior investment strategist at Charles Schwab, said Wednesday afternoon’s market rally from oversold levels made sense. But he cautioned that “to have a high conviction call on anything right now is a fool’s errand.” “We just have to wait and see what the ultimate policy is, but unfortunately the policy changes almost on a daily basis,” said Gordon.

“You have to put yourself in the shoes of a business that’s trying to make capital spending or hiring plans in this environment. If the rules of the game are constantly changing on a day-to-day basis, I don’t see how that’s a healthy environment for businesses.”

According to preliminary data, the S&P 500.SPX gained 470.58 points, or 9.49%, to end at 5,453.35 points, while the Nasdaq Composite.IXIC gained 1,857.06 points, or 12.16%, to 17,124.97. The Dow Jones Industrial Average.DJI rose 2,942.91 points, or 7.82%, to 40,588.50.

Also helping investor sentiment was the U.S. Treasury’s $39-billion 10-year note US10YT=RR auction, which came within market expectations, priced at a high yield of 4.435%, lower than the rate forecast at the bid deadline, suggesting solid investor demand.

European and Asian stock markets had earlier tumbled along with oil and the dollar as the confrontation escalated.

US bond yields had also risen amid a sharp sell-off — a major economic red light as sovereign government debt is normally seen as a safe haven for investors in troubled times.

Before his pivot, Trump said world leaders were rushing to negotiate “tailored” deals with the US, with Japan and South Korea among those sending delegations to Washington.

“I’m telling you, these countries are calling us up,” Trump told a dinner with fellow Republicans on Tuesday night.

In its reaction, the Chinese finance ministry said: “The tariff escalation against China by the United States simply piles mistakes on top of mistakes.”

Since returning to the White House in January, Trump has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute. The on-again, off-again approach has baffled world leaders and spooked business executives, who say the uncertainty has made it difficult to forecast market conditions.

“Trump is gaining a reputation now for flip-flopping on tariffs and not having a consistent economic policy,” said Marcus Brookes of Quilter Investors.

US Treasury Secretary Scott Bessent said the administration needed time to negotiate with more than 75 countries that had reached out and suggested Trump had used the tariffs to create “maximum negotiating leverage for himself.”

“This was his strategy all along,” he told reporters at the White House. “And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor.”

Bessent is the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters. Trump has spoken with leaders of Japan and South Korea, and a delegation from Vietnam was due to meet with US officials on Wednesday. Bessent declined to say how long negotiations might take.

Trump’s announcement appeared to surprise US Trade Representative Jamieson Greer, who was testifying on Capitol Hill. “I understand it’s 90 days, I haven’t spoken to the president,” he told lawmakers. “It looks like your boss just pulled the rug out from under you and paused the tariffs, the taxes on the American people. There’s no strategy,” Democratic US Representative Steven Horsford said.