WASHINGTON (Reuters) — In a stunning reversal, US President Donald Trump said he would temporarily lower the hefty duties he had just imposed on dozens of countries while further ramping up pressure on China, sending global stocks rocketing higher.
Trump's turnabout on Wednesday, which came less than 24 hours after steep new tariffs kicked in on most trading partners, followed the most intense episode of financial market volatility since the early days of the COVID-19 pandemic. The upheaval erased trillions of dollars from stock markets and led to an unsettling surge in US government bond yields that appeared to catch Trump's attention.
"I thought that people were jumping a little bit out of line, they were getting yippy, you know," Trump told reporters after the announcement, referring to a golf term.
Since returning to the White House in January, Trump has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute. The on-again, off-again approach has baffled world leaders and spooked business executives, who say the uncertainty has made it difficult to forecast market conditions.
The day's events cast into stark relief the uncertainty surrounding Trump's policies and how he and his team create and implement them.
US Treasury Secretary Scott Bessent asserted that the pullback had been the plan all along to bring countries to the bargaining table. Trump, though, later indicated that the near-panic in markets that had unfolded since his April 2 announcements had factored in to his thinking.
Despite insisting for days that his policies would never change, he told reporters on Wednesday: "You have to be flexible." But he kept the pressure on China, the No. 2 provider of US imports. Trump said he would raise the tariff on Chinese imports to 125 percent from the 104 percent level that took effect at midnight, further escalating a high-stakes confrontation between the world's two largest economies. The two countries have traded tit-for-tat tariff hikes repeatedly over the past week.
Trump's reversal on the country-specific tariffs is not absolute. A 10 percent blanket duty on almost all US imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.
The 90-day freeze also does not apply to duties paid by Canada and Mexico, because their goods are still subject to 25 percent fentanyl-related tariffs if they do not comply with the US-Mexico-Canada trade agreement's rules of origin. Those duties remain in place for the moment, with an indefinite exemption for USMCA-compliant goods.
"China is unlikely to change its strategy: stand firm, absorb pressure, and let Trump overplay his hand. Beijing believes Trump sees concessions as a weakness, so giving ground only invites more pressure," said Daniel Russel, vice president of international security and diplomacy at the Asia Society Policy Institute.
"Other countries will welcome the 90-day stay of execution — if it lasts — but the whiplash from constant zigzags creates more of the uncertainty that businesses and governments hate," Russel said.
