President Donald Trump on Wednesday announced a complete three-month pause on all the “reciprocal” tariffs that went into effect at midnight, with the exception of China, a stunning reversal from a president who had insisted historically high tariffs were here to stay.
But enormous tariffs will remain on China, the world’s second-largest economy. In fact, Trump said they will be increased to 125 per cent from 104 per cent after China announced additional retaliatory tariffs against the United States earlier on Wednesday.
All other countries that were subjected to reciprocal tariff rates Wednesday will see rates go back down to the universal 10 per cent rate, he said.
“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 per cent, effective immediately,” Trump said in a social media post.
“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,” he wrote as reported by CNN on Wednesday.
Speaking to reporters after the announcement, Trump said: “Nothing’s over yet, but we have a tremendous amount of spirit from other countries, including China. China wants to make a deal, they just don’t know how quite to go about it.”
Wall Street breathed a sigh of relief, however, that Trump was backing down on other extreme trade measures. Stocks rallied sharply on the news – even though the 10 per cent universal tariff on all imports coming into the United States remained in effect.
The Dow surged over 2,700 points, or 7.3 per cent. The S&P 500 rose 9.2 per cent and the Nasdaq was nearly 12 per cent higher. Markets have been getting slammed by the prospect of the significantly higher tariffs Trump laid out last week, the CNN report said.
Trump told reporters his decision to move forward with the pause was in part influenced by people “getting a little yippy yappy.”
“You have to have flexibility,” he added, a stark about-face from recent comments he and administration officials have made recently insisting Trump was not going to back off his promises.
Shortly after the announcement, Treasury Secretary Scott Bessent said the pause was part of “his strategy all along.” But he also said that Trump had “great courage to stay the course until this moment.”
CNN previously reported that Bessent traveled to Mar-a-Lago on Sunday to discuss the tariffs with Trump, encouraging him to focus on an endgame of reaching new deals with a variety of countries.
Meanwhile, US Trade Representative Jamieson Greer on Wednesday testified at a House hearing that he wasn’t aware of the pause until after it was announced.
Greer added he was aware the policy change was a possibility Wednesday morning, but when asked directly if he knew the policy was going into effect, he replied that the administration discusses “all kinds of policies.”
Bessent said Trump would be “personally involved” in all the discussions as he seeks out concessions. “No one creates leverage for himself like President Trump,” Bessent said.
The message sought to cast to other countries was: “Do not retaliate and you will be rewarded,” he said, adding that the move “signals that President Trump cares about trade and that we want to negotiate in good faith.”
Bessent didn’t offer many details on what could happen after the 90-day pause, but he said the administration will continue to have discussions with other countries in the interim. For example, he said US government officials were meeting with representatives from Vietnam on Wednesday.
“These are complicated negotiations,” he said. But having seen the “maximum level” that Trump is willing to go on tariffs, he feels more countries will be willing to give in.
The higher tariffs on China came after Beijing announced new retaliatory tariffs of 84 per cent on US goods set to take effect on Thursday. The Trump administration has taken particular aim at China’s trade practices.
“We will see what China does but what I’m certain of is what China is doing will affect their economy much more than ours,” Bessent said Wednesday.
Trump appears to be ratcheting up pressure in the hopes that President Xi Jinping will blink first. He may be waiting a while, according to Wendong Zhang, an assistant professor of applied economics and policy at Cornell University.
“China has vowed to ‘fight to the end,’ and there are risks of even more escalations,” Zhang said in an email. “China has already reduced its reliance on US products, such as soybeans and other agricultural products, since the 2018-19 trade war. But this time around, Chinese leaders have the backing of a more supportive general public to stand up to the US and pivot to domestic consumption.”
Announcing China’s response, the State Council Tariff Commission said in a statement: “The US escalation of tariffs on China is a mistake upon mistake, severely infringing upon China’s legitimate rights and interests, and seriously damaging the multilateral trading system based on rules.”
The amped-up retaliation comes after China repeatedly warned that it would “fight to the end” if the US moved forward with further tariffs.
Goldman Sachs economists said after Wednesday’s announcement they were reverting to a prior forecast predicting a 45 per cent chance of a recession in the next 12 months. Before the announcement, they forecast a recession as the “base case,” meaning it was highly likely to occur.
Emmanuel Addeh
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