President Donald Trump has implemented a 90-day pause on increased tariffs for most nations, while simultaneously escalating trade tensions with China. This policy shift occurred shortly after new levies took effect against numerous U.S. trading partners.
Trump authorized a “lowered reciprocal tariff of 10%” for countries that had not retaliated against initial U.S. tariffs. This decision followed a week of global market instability, triggered by Trump’s announcement of a baseline 10% tariff on all imports, with higher rates for countries deemed to have unfair trade practices.
However, the pause did not extend to China. Trump increased tariffs on Chinese goods to 125%, accusing Beijing of “lack of respect” after it retaliated by imposing 84% tariffs on U.S. imports. This escalation comes amidst already heightened tensions, with China vowing to “fight to the end” if the U.S. “insists on provoking a tariff war.”
The initial tariff announcements last week caused significant market instability, leading to trillions in losses worldwide and raising concerns about potential price increases and a recession. Prior to the tariff pause, U.S. government debt interest rates spiked to 4.5%, the highest since February. Following the pause announcement, U.S. stock markets surged, with the S&P 500 closing up 9.5% and the Dow Jones rising 7.8%.
Trump defended his policy changes, stating he implemented the 90-day pause because people were “getting yippy.” He also expressed optimism that China would ultimately seek a deal. Treasury Secretary Scott Bessent denied the changes were influenced by market volatility, while Democrats criticized the move as a retreat.
The ongoing trade dispute between the U.S. and China, the world’s two largest economies, threatens to significantly disrupt global trade. World Trade Organization forecasts suggest a potential 80% drop in goods trade between the two nations, representing a $466 billion loss.
Meanwhile, other tariffs, including those on cars, steel, and aluminum, remain in effect. The European Union, initially facing higher tariffs, will now be subject to the 10% baseline rate due to their retaliatory tariffs not yet being implemented. Canada and Mexico remain unaffected by the baseline tariff.
Related Readings:
