In a remarkable turnaround, U.S. President Donald Trump announced he would temporarily reduce the heavy tariffs, also known as the 90-day freeze. These tariffs he recently implemented on numerous countries, while simultaneously intensifying pressure on China, which caused global stocks to soar.
Trump’s reversal on Wednesday, which came less than 24 hours after abrupt new tariffs were imposed on most trading partners, followed the most severe episode of financial market instability since the early days of the COVID-19 pandemic. The turmoil wiped out trillions of dollars from stock markets and led to an alarming spike in U.S. government bond yields that seemed to grab Trump’s attention.
“I thought that people were overreacting a little bit, they were getting anxious, you know,”
Trump said after the announcement. He was referencing a golf term.
In the months following his inauguration in January, Trump has repeatedly threatened a range of punitive actions on trading partners, only to rescind some of them at the last moment. The on-again, off-again strategy has puzzled global leaders and unnerved business executives, who claim the unpredictability has made it difficult to predict market conditions. The day’s events highlighted the uncertainty surrounding Trump’s policies and how he and his team develop and implement them.
U.S. Treasury Secretary Scott Bessent claimed that the retreat had been the plan all along to bring nations to the negotiating table. Trump, however, later suggested that the near-panic in markets that had unfolded since his April 2 announcements had influenced his thinking.
Despite pressing for days that his policies would never shift, he told reporters on Wednesday: “You have to be adaptable.”
But he maintained pressure on China, the No. 2 source of U.S. imports. Trump stated he would increase the tariff on Chinese imports to 125% from the 104% level that took effect at midnight, further intensifying a high-stakes standoff between the world’s two largest economies. The two nations have exchanged tit-for-tat tariff increases repeatedly over the past week.
Trump’s shift on the country-specific tariffs is not total. A 10% universal levy on nearly all U.S. imports will remain in effect, the White House stated. The announcement also does not seem to impact duties on vehicles, steel, and aluminum currently in place.
Trump’s tariffs had triggered a days-long selloff that wiped out trillions of dollars from global stocks and pushed U.S. Treasury bonds and the dollar, which constitute the foundation of the global financial system. Canada and Japan stated they would intervene to provide stability if necessary – a role typically undertaken by the United States during times of economic turmoil.
Analysts noted that the abrupt surge in share prices might not reverse all of the damage. Surveys have revealed slowing business investment and consumer spending due to concerns about the impact of the tariffs, and a Reuters/Ipsos survey found that three out of four Americans anticipate prices to rise in the months ahead.
Goldman Sachs reduced its likelihood of a recession to 45% after Trump’s action, down from 65%, stating the tariffs remaining in place were still expected to lead to a 15% increase in the overall tariff rate.
Treasury Secretary Bessent dismissed questions about market turbulence and stated the sudden reversal rewarded nations that had followed Trump’s counsel to refrain from retaliation. He suggested Trump had utilized the tariffs to generate maximum negotiating power. “This was his plan all along,” Bessent told reporters. “And you could even say that he provoked China into a vulnerable position.”
Bessent is the lead negotiator in the country-specific discussions that could address foreign aid and military cooperation, as well as economic issues. Trump has conversed with leaders of Japan and South Korea, and a delegation from Vietnam met with U.S. officials on Wednesday to discuss trade matters, the White House said. Bessent declined to specify how long negotiations with the more than 75 nations that have reached out might take.
Trump mentioned that a resolution with China could be feasible. However, officials indicated that they will focus on discussions with other countries first.
