President Trump abruptly announced he would back down on his “reciprocal” tariffs for 90 days, sending stocks soaring on Wednesday. The S&P 500 rose 9.5 percent, its sharpest single-day gain since October 2008. Wall Street embraced the policy reversal, relieved that Mr.
Trump would not follow through with most of his tariff plans. However, Mr. Trump specified that the tariff relief would not extend to China, one of America’s biggest trading partners.
The President announced that he would instead raise tariffs on Chinese exports to 125 percent after Beijing responded with a new round of retaliation. The turnabout came days after Mr. Trump declared on social media that he would never change his tariff policies.
Karoline Leavitt, the White House press secretary, explained that the tariff rate for most countries would be brought down to 10 percent. Despite the market rally, the S&P 500 remained down 11.2 percent from its high in February. The announcement came amid a sell-off in U.S. bonds, which are generally considered safer investments.
Mr. Trump acknowledged that his decision was made in response to the market turmoil, telling reporters Wednesday afternoon that “you have to be flexible” and that “over the last few days it looked pretty glum.”
Before the pivot, Mr. Trump’s latest tariffs had impacted nearly all U.S. trading partners, with Beijing responding by imposing an 84 percent levy on American-made products.
This left American companies that import from China still on edge.
Stocks surge after tariff pause
In Washington, Mr.
Trump’s trade representative, Jamieson Greer, defended the decision to view the United States’ trade deficit as a national emergency, calling it “a manifestation of the loss of the nation’s ability to make, grow, and build.”
Before the pause was announced, European Union member states planned retaliatory measures against the United States, which would take effect on Tuesday. Documents indicated that duties of 25 percent would be applied to a wide range of goods imported from the United States. A sharp sell-off in U.S. government bond markets indicated concerns about the fallout of a trade war.
The 10-year U.S. Treasury yield jumped to around 4.4 percent, up from below 4 percent at the start of the week. U.S. oil prices fell to about $56 a barrel on Wednesday morning, the lowest level in more than four years. However, after the tariffs were paused, prices climbed back to more than $62.
In commercial and industrial hubs across Asia, businesses grappled with the effects of the levies. For some companies, U.S. tariffs have made China a more appealing place to produce in and buy from. Commerce Secretary Howard Lutnick cautioned against countries retaliating against U.S. tariffs, pointing out China’s current plight with its 125 percent tariffs after announcing new measures.
President Trump expressed hope that Chinese President Xi Jinping would reach out about a deal, saying, “I can’t imagine it. I don’t think we’ll have to do it more.”
The announcement has led to a boost in viewership for financial news networks. Fox Business saw a 25 percent increase in viewership, while CNBC experienced a 75 percent rise.
“This is something, certainly, we’ve been talking about for a period of time,” President Trump said of his decision to pause his tariffs, adding that his administration did not want to hurt countries unnecessarily. “Investors should brace for more market volatility in the coming weeks and months as Trump’s trade policy becomes more coherent,” said Michael Arone, a chief investment strategist at State Street Global Advisors. “The trade war may not be over, but at least for today, investors have won the battle.”
