Trump announces 90-day pause on steep global tariffs, hikes China levy to 145%

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U.S. President Donald Trump backpedalled on steep global tariffs within hours of them taking effect, but ratcheted up his trade war with China – sparking a stunning rally in stock prices and stabilizing financial markets that had been thrown into turmoil.

On Wednesday afternoon, Mr. Trump announced a 90-day pause on the country-by-country tariffs he had unveiled only a week earlier. Dozens of countries had been hit by U.S. tariffs ranging from 20 per cent to 50 per cent. These were lowered to 10 per cent for the next three months, in line with a baseline tariff that came into force last weekend.

The U.S. stock market, which had plummeted in the wake of Mr. Trump’s “Liberation Day” announcement last week, staged a historic rebound.

The S&P 500 finished the trading day up 9.5 per cent, while the Nasdaq Composite rose 12.5 per cent, reversing much of the sell-off since last Wednesday. Other markets rose in tandem, with the S&P/TSX Composite gaining 5.4 per cent, and benchmark oil prices rising more than 5 per cent.

While Mr. Trump moderated his attack on most trading partners, he doubled down on China, increasing “reciprocal” tariffs on the country’s goods to 125 per cent. That followed a tit-for-tat escalation from Beijing, which said earlier on Wednesday that it would increase tariffs on U.S. goods to 84 per cent.

“China wants to make a deal. They just don’t know how quite to go about it,” Mr. Trump told reporters Wednesday afternoon, after announcing the tariff changes on social media. “President Xi’s a proud man … they’ll figure it out, they’re in the process of figuring it out.”

Canada was not subject to the new U.S. tariffs announced last week, so Mr. Trump’s pause on Wednesday does not impact the country. But while Canada won’t be subject to the 10-per-cent duty, it is still facing tariffs on goods that don’t comply with the continental free-trade agreement, as well as sectoral levies on automobiles, steel and aluminum.

Mr. Trump said Wednesday that he changed course after achieving his goal of forcing more than 75 countries to come to the negotiating table to work out new trade agreements.

“You have to have flexibility. I could say, here’s a wall, and I’m going to go through that wall. I’m going to go through it no matter what, and keep going. And you can’t go through the wall,” he said.

But Mr. Trump also appeared to blink in the face of growing turmoil in financial markets, and criticisms on Wall Street and from within his own party.

A chorus of Wall Street titans, such as Jamie Dimon of JPMorgan Chase and Larry Fink of BlackRock, have warned in recent days that Mr. Trump’s aggressive and erratic trade policy risked pushing the country into a recession and reigniting inflation. And a small but growing number of Republican members of Congress had expressed concerns about the tariffs – an unusual break with the President.

In recent days, the sell-off in stocks had also moved to U.S. Treasury bonds, the most important market in the world, as it underpins most other markets.

Ten-year U.S. Treasury yields leapt more than half a percentage point over two days, as investors dashed for cash. That pushed up borrowing costs throughout the U.S. economy. By Tuesday night, bond markets were sending worrying signals about financial stability, and analysts were questioning whether the decades-old reputation of U.S. treasuries as a “safe haven” asset was a thing of the past.

Mr. Trump told reporters that he’d been watching the bond market gyrations.

“The bond market is very tricky. I was watching it, but if you look at it now, it’s beautiful. The bond market right now is beautiful. But yeah, I saw last night where people were getting a little queasy,” the President said.

“Although President Donald Trump was able to resist the stock market sell-off, once the bond market began to weaken, too, it was only a matter of time before he folded on his eye-wateringly high tariffs,” wrote Paul Ashworth, chief North America economist at Capital Economics, in a note to clients.

“Our working assumption now will be that, cowed by the market response, Trump will repeatedly extend the ‘pause’ meaning that this will end up looking a lot like the 10 per cent universal tariff that he campaigned on.”

The 90-day pause will open the door to country-by-country “bespoke” trade negotiations between the United States and other countries, U.S. Treasury Secretary Scott Bessent told reporters Wednesday. The administration has said a key goal of what it calls “reciprocal” tariffs is to get other countries to lower their tariffs and nontariff barriers on U.S. goods.

Mr. Trump also suggested that he was open to discussions with companies about tariff exemptions, a break from his previous position.

“Some companies, through no fault of them, they happen to be in an industry that is more affected by these things than others. You have to be able to show a little flexibility, and I’m able to do that,” he said.

Meanwhile, Mr. Trump’s position on China hardened Wednesday, with yet another round of tariffs that, stacked onto 20-per-cent duties related to fentanyl, raised the effective rate on Chinese goods to 145 per cent. The White House confirmed the fact the tariffs would stack on Thursday. Mr. Trump said this was because Beijing has retaliated against U.S. tariffs.

China has signalled that it is not backing down. The country’s state media has been unleashing a barrage of criticism against the U.S., and earlier this week, China’s Ministry of Commerce said it “will fight to the end.”

Experts predict that the trade war between the two countries could intensify from here. U.S.-China relations “have entered a phase of economic brinksmanship, with a growing risk of continued and even uncontrolled escalation,” said Julian Gewirtz, a senior China policy official at the White House and State Department under President Biden.

“Neither side seems interested in taking the first step toward an off-ramp yet. China’s official messaging is conveying that they are determined to stand up to U.S. pressure even at high costs, have made domestic economic preparations for what may come, and have levers to continue to hit back.”

The European Union also retaliated to Mr. Trump’s tariffs on Wednesday, but the counterassault was timid compared with China’s, suggesting the 27-nation bloc was still hoping for a deal with the U.S. President that could end the trans-Atlantic trade war.

It was not immediately known whether the EU would suspend its countertariffs while it tries to negotiate a trans-Atlantic trade deal. Earlier this week, European Commission President Ursula von der Leyen offered the White House a “zero-for-zero” tariff structure on industrial goods, but it was rejected by the White House.

“I think volatility is going to remain with us just based on the broad uncertainty and the fact that these tariff decisions just change from day to day,” said John Canavan, lead analyst at Oxford Economics, in an interview.

“But the fact that we’ve seen some calming, and some acknowledgment of the risks and the damage this is doing to the financial markets, should at least calm the situation.”

With reports from Eric Reguly and James Griffiths