President Donald Trump reversed course Wednesday on his sweeping tariff plan, announcing a 90-day pause on new tariffs for most nations that agreed to negotiate new trade deals.
However, Trump simultaneously fired back in the trade war with China by raising tariff rates to 125% after their country refused to come to the bargaining table and, instead, escalated their own tariffs.
U.S. markets surged in response to the partial retreat. The S&P 500 jumped nearly 6% after erasing an earlier loss, the Dow Jones Industrial Average soared over 2,000 points (5%), and the Nasdaq composite climbed 6.8%.
The dramatic shift narrows what had been an unprecedented global trade war to a more focused confrontation between the United States and China.
The precise details of which countries will benefit from the 90-day pause remain unclear, as the White House has not yet provided complete details.
Trump’s decision came just hours after his administration had started to implement the “Liberation Day” tariffs announced on April 2, which imposed a minimum 10% tax on imports from nearly all trading partners, with steeper rates for countries with trade surpluses against the U.S.
The escalation against China follows a rapid series of retaliatory trade moves between the two economic powers. After Trump initially announced a 34% tariff on Chinese goods last week (in addition to existing tariffs), Beijing responded with its own 34% retaliatory tariff on American products.
Trump then threatened an additional 50% tariff if China refused to withdraw its countermeasures. When President Xi Jinping fired back again, the U.S. implemented a 104% tariff earlier today, before Trump’s latest announcement pushed the rate even higher to 125%.
White House Press Secretary Karoline Leavitt had signaled a hard-line stance from the administration earlier in the day: “Countries like China, who have chosen to retaliate and try to double down on their mistreatment of American workers, are making a mistake. President Trump has a spine of steel, and he will not break.”
Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick reportedly joined Trump in crafting the message announcing the tariff reversal.
The European Union, which has already approved retaliatory tariffs on $23 billion in U.S. goods, is proceeding with plans to implement these measures in stages, with some taking effect April 15, followed by additional tariffs on May 15 and December 1. Canada has enacted a 25% levy on auto imports from the U.S. that don’t comply with the 2020 US-Mexico-Canada Agreement.
Some Trump supporters acknowledged there could be short-term financial pain from market volatility while the president negotiates, while maintaining their backing of the overall trade strategy.
Barstool founder Dave Portnoy, who recently went viral for comments about his net worth dropping by millions, said Trump “can’t show weakness in these negotiations, so you can’t just run now that the market is bad because then all of this would have been for nothing. So I’m hoping his art of the deal comes to fruition.”
Economists have warned that long-term tariffs could trigger a global recession and increase inflation. Congressional Republicans have expressed concern about impacts on their constituents but continue to stand behind the president.
The Trump administration has framed its aggressive trade policies as necessary to help correct decades of unfair practices by trading partners, particularly China. The White House has cited a 2018 Economic Policy Institute report claiming the U.S. trade deficit with China eliminated 3.4 million American jobs between 2001 and 2017.
China’s state-run Global Times previously called Trump’s reciprocal tariffs a tool to “blackmail” China and a means for “extreme pressure and to pursue selfish interests.”