President Donald Trump 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.
Enormous tariffs on China, the world’s second-largest economy, will remain. Trump even increased them to 125% after China responded with tariffs of its own. Other countries affected by reciprocal tariffs will see rates drop to the universal 10% rate.
Trump stated, “I am raising the Tariff charged to China by the United States of America to 125%, effective immediately. China will realize the days of ripping off the U.S.A. and other countries are unsustainable.”
Trump expressed optimism about future deals with China.
Wall Street welcomed the moderation, with stocks rallying despite the 10% universal tariff on imports.
The Dow surged over 2,700 points, the S&P 500 rose 9.2%, and the Nasdaq nearly 12% higher. Markets were hit hard by the prospect of higher tariffs Trump laid out last week.
Hours before the announcement, Trump said, “THIS IS A GREAT TIME TO BUY!!!” He concluded the post with “DJT,” possibly a nod to Trump Media & Technology Group Corp, whose shares were down nearly 13% this month. After the announcement, shares rose over 20% for Wednesday alone.
Trump said the pause was partly due to people getting “yippy yappy.” He emphasized the need for flexibility, a stark contrast to recent comments asserting he wouldn’t back down on his promises.
The pause was part of Trump’s tariff strategy. Treasury Secretary Scott Bessent said it was part of his plan but also praised Trump’s courage to stay the course. CNN reported that Bessent visited Mar-a-Lago on Sunday to encourage Trump to focus on reaching new deals with various countries.
US Trade Representative Jamieson Greer testified at a House hearing that he wasn’t aware of the pause until after it was announced.
Greer acknowledged the policy change possibility Wednesday morning but denied knowing its effective date when asked directly. Trump personally involved in discussions seeking concessions, Bessent said, noting no one creates leverage like him. The message to other countries was: “Don’t retaliate and you’ll be rewarded,” signaling good faith trade negotiations.
Bessent and Commerce Secretary Howard Lutnick accompanied Trump when he posted on Truth Social. Lutnick confirmed on X that Bessent and he sat with the President while he wrote the post. Bessent offered limited details on the 90-day pause but emphasized ongoing discussions with other countries, like US government officials meeting with Vietnamese representatives on Wednesday. He believes countries will be more willing to compromise given Trump’s maximum willingness to escalate tariffs. Escalating tensions with China followed Beijing’s announcement of 84% retaliatory tariffs on US goods set to take effect Thursday. The Trump administration has targeted China’s trade practices. Bessent assured that China’s actions would harm its economy more than ours.
Trump intensifies pressure, hoping President Xi Jinping will back down. According to Wendong Zhang, an assistant professor at Cornell University, China may wait, as it risks more escalations despite reducing reliance on US products since the 2018-19 trade war. Chinese leaders now have public support to stand up to the US and pivot to domestic consumption.
The State Council Tariff Commission condemned the US escalation of tariffs, stating it was a mistake that damaged the multilateral trading system.
After China warned of retaliation, Trump proceeded with reciprocal tariffs, pushing economists to increase recession forecasts. While the 90-day pause may have pleased investors, it’s unlikely to prevent a recession, Joe Brusuelas, chief economist at RSM US, told CNN.
“The economy is likely to fall into recession due to simultaneous shocks,” Brusuelas said. “The pause postpones punitive import taxes on US trade allies, but it won’t prevent a recession.”
Goldman Sachs economists reversed their forecast, predicting a 45% chance of recession in the next 12 months, down from the “base case” of a recession.
Jake Colvin, president of the National Foreign Trade Council, called the pause a positive step but cautioned against celebrating it as it still maintains a 10% tariff baseline on most countries, significant levies on China, steel, aluminum, and autos, with more duties to come.
Trump’s 25% tariffs on the three industries remain, and he has vowed to impose tariffs on other industries like lumber, pharmaceuticals, and copper.
The pause offers little relief to businesses from the uncertainty surrounding the tariff environment since Trump’s November victory.