Amid a global market crisis, the U.S. President took a dramatic step on Wednesday, temporarily suspending tariffs on most countries for 90 days while increasing the tariff rate on Chinese imports to 125%. This move seemed to signal an effort to shift focus from a broad trade war to a direct confrontation between the U.S. and China. Following the announcement, the S&P 500 surged by 9.5%, but the ongoing issues surrounding the President’s tariff policies were far from resolved, as plans for negotiations with individual countries continued.
The decision came in response to increasing pressure from volatile financial markets. While some officials within the administration maintained that the tariff suspension had always been part of the plan, market instability had escalated concerns among voters and businesses alike. As stocks and bonds declined, retirement savings were shrinking, and businesses warned of weaker sales and rising costs all potential consequences for a country that had reelected the President in part to address inflation. The global economy appeared to be rejecting the President’s tariffs as they were implemented, which signaled that market forces were influencing U.S. policy. By midday, the President announced on social media that over 75 countries had reached out for trade talks and, in response, he was authorizing a 90-day pause on tariffs, with a substantially reduced 10% rate during that period.
Later, the President explained to reporters that he had pulled back on many tariffs, except those targeting China, because market reactions, including the decline in bond prices, had caused unease among investors. He acknowledged that while he was optimistic about reaching trade deals, the situation was still ongoing. Treasury Secretary Scott Bessent indicated that the next three months would involve “bespoke” negotiations with individual countries, focusing on tailored agreements rather than a blanket approach.
Bessent added that the pause was due to requests from other countries to begin talks, although this statement was later contradicted by the President, who cited market concerns as a driving factor. Secretary Bessent stressed that the U.S. would negotiate in good faith, expecting allies to do the same.
Commerce Secretary Howard Lutnick later disagreed with the President’s explanation, stating that it was not the market downturn but rather requests from other nations that prompted the tariff suspension. The President himself clarified that he had been considering the move for several days, but it only “came together” that morning.
The new 10% tariff, which applied to most nations starting on Saturday, marked a significant reduction from the higher rates previously imposed on the European Union, Japan, and South Korea. Canada and Mexico, however, would still face up to 25% tariffs due to separate directives, primarily aimed at combating fentanyl trafficking. Before the President’s decision, business leaders had warned that his policies could lead to a recession, while some key trade partners retaliated with their own tariffs and the stock market remained unstable.
White House press secretary Karoline Leavitt defended the move, suggesting that the media had misunderstood the President’s strategy. She argued that, far from pushing the world closer to China, the U.S. had become the focal point for global trade discussions.
The head of the World Trade Organization warned that the ongoing trade tensions between the U.S. and China could have dire global consequences, potentially fragmenting international trade along geopolitical lines. Market turmoil had been building in the weeks leading up to the President’s decision, with some uncertainty over whether the tariffs would remain in place or become subject to negotiation.
Particularly concerning to investors was the decline in U.S. government debt’s appeal as a safe-haven asset. Bond prices were falling, leading to a rise in the interest rate on the 10-year Treasury note to 4.45%. The rate eased somewhat following the President’s tariff reversal.
Market experts had anticipated a trade truce, with one analyst noting that without some de-escalation in the trade disputes, market stabilization would be difficult to achieve.
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