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In an unexpected move, US President Donald Trump pleasantly surprised global markets on Wednesday with a major reversal on his tariff policy — announcing a 90-day pause on increased duties for most countries while unleashing a steep new 125% tariff on imports from China.
The about-face capped a wild week of financial turmoil and geopolitical uncertainty following Trump’s “Liberation Day” announcement of sweeping global tariffs. The new move — revealed via his Truth Social account — triggered a euphoric rally on Wall Street and major stock exchanges across Asia.
“I have authorized a 90 day PAUSE,” Trump posted, crediting the decision to over 75 countries reaching out for trade talks and, crucially, refraining from retaliation.
The S&P 500 surged 9.5%—its third-best day since 1940 — and the Dow Jones rocketed nearly 3,000 points, helping to reverse a weeklong slide triggered by Trump’s initial tariff escalation.
But while most of the world exhaled, Trump made clear that China would not get a reprieve — only more pressure.
Why Trump hiked tariffs on China
- Trump’s decision to isolate China for special punishment wasn’t economic alone — it was deeply personal and strategic.
- “They were very disrespectful. They didn’t respond right. They retaliated,” Trump said, referencing China’s new 84% tariffs on US goods.
- Trump has long viewed China as the central villain in his economic narrative — accusing Beijing of dumping cheap goods, manipulating currency, and stealing US intellectual property.
- He’s also repeatedly claimed that Chinese leaders don’t understand how to negotiate with him, even as talks between Washington and Beijing have stalled for months.
- “China wants to make a deal,” Trump said. “They just don’t know quite how to go about it.”
- His aides say the 125% tariff is meant to squeeze Beijing into coming to the table — but also to protect American manufacturing from what Trump calls “flooding the world with junk.”
- White House press secretary Karoline Leavitt said China was “getting aggressive” while the rest of the world was “coming to us.”
- “You tried to say that the rest of the world would be moved closer to China,” she told reporters, “when in fact, we’ve seen the opposite effect.”
Why it matters
- Trump’s sudden pivot narrows what had looked like a global trade war into a more focused confrontation with China. It also showcased his willingness to use economic shockwaves as a negotiation tool — and walk them back just as fast.
- By shielding most countries from harsher tariffs — at least temporarily — Trump is isolating Beijing while attempting to rally allies. But the escalation with China opens a new chapter in an already brutal trade war between the world’s two largest economies.
- Trump denied that he backtracked on tariffs, saying, “You have to be flexible,” while describing a jittery financial environment.
- “People were jumping a little bit out of line, they were getting yippy, a little bit afraid,” Trump said — using a sports term for nerves.
Between the lines
- Trump is sharpening his second-term economic agenda: One part protectionist populism, one part shock-and-awe diplomacy. This tariff saga shows how the president blends hardline stances with last-minute recalibrations when the economic pain gets too real.
- His administration argues that the tariff threats have drawn world powers to the negotiating table — including countries once considered hostile to his trade approach.
- “The entire world is calling the United States of America, not China, because they need our markets,” said White House press secretary Karoline Leavitt.
- The decision to pause tariffs wasn’t made in a vacuum. Trump admitted watching “the very tricky” US bond market and saw yields rising as stocks tumbled — a warning sign that rattled both investors and the White House.
- Behind the scenes, aides insisted this was part of a broader Trump strategy. Treasury secretary Scott Bessent framed it as deliberate brinkmanship: “This was his strategy all along,” Bessent said, suggesting that Trump had “goaded China into a bad position.”
- But the president himself contradicted that clean narrative, admitting he’d been reconsidering his tariffs due to recent market moves — and warning, “Nothing’s over yet.” “A lot of times, it’s not a negotiation until it is,” Trump said.
What they’re saying
Markets rejoiced, especially after days of sharp losses:
- S&P 500 jumped 9.5% to 5,456.90
- Dow Jones gained 2,962 points, or 7.9%
- Nasdaq soared 12.2% — its biggest single-day gain since 2008
Asia followed suit, with Japan’s Nikkei 225 leaping more than 2,000 points at open, up 8.8%. South Korea’s Kospi and Australia’s S&P/ASX also posted large gains. Even China’s Shanghai Composite saw modest gains — a sign traders hope the worst might be over.
Stephen Innes of SPI Asset Management described the market reaction as a shift “from fear to euphoria.”
But not all were convinced the volatility is behind us. “Markets more broadly… are looking for signs that a trade de-escalation is coming,” said TD Securities’ Gennadiy Goldberg. “Absent any de-escalation, it’s going to be difficult for markets to stabilize.”
What’s next
The next 90 days will be a whirlwind of behind-the-scenes negotiations. Bessent confirmed the US will pursue “bespoke” deals — case-by-case arrangements that could touch on trade, security, and even foreign aid.
“The only certainty we can provide is that the US is going to negotiate in good faith,” Bessent said, suggesting talks with Japan, South Korea, India, and Vietnam are already underway.
But China remains on a separate track — or perhaps no track at all.
Trump appears intent on cornering Xi Jinping’s government, betting they’ll be forced to cave under pressure. China responded Thursday with 84% tariffs on US goods and sharp warnings:
“If the US insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the commerce ministry said.
Tourism warnings followed, and US officials worry China could respond with more economic weapons — including squeezing access to rare earth metals or targeting American tech firms operating in China.
Bottom line: Trump’s fixation on China reflects his long-standing grudge against Beijing, accusing it of “dumping” cheap goods and gutting US manufacturing. His strategy—easing pressure on allies while doubling down on Xi Jinping’s regime—aims to isolate China economically, though analysts like Daniel Russel of the Asia Society Policy Institute doubt Beijing will blink. “China sees concessions as weakness,” he said.
What to watch
- China’s next move: Beijing has hinted at further retaliation — but so far, its 84% tariffs still fall well short of Trump’s.
- Bond markets: Trump said the bond market “is beautiful” now — but another scare could force fresh policy pivots.
- Talks timeline: Countries like Japan and Vietnam are in active negotiations. Will others, like the EU or Can get firm deals before the 90 days expire?
- Public opinion: A Reuters/Ipsos poll found 75% of Americans expect prices to rise due to Trump’s tariffs — even with the pause.
(With inputs from agencies)
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