President Donald Trump said Wednesday he was pausing higher targeted tariffs for 90 days for most countries, a stunning reversal in his trade war that has sent markets reeling.
Trump wrote on social media just before 1:30 p.m. that he came to the decision because more than 75 trading partners didn’t retaliate and have reached out to the United States to “discuss” some of the issues he had raised.
The pause didn’t apply to China, which has retaliated — with 84% hikes. Trump instead raised duties for it to 125%, effective immediately.
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately,” he wrote. “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.”
But the trade war isn’t exactly over, and the pause didn’t return the world to the time before Trump touched off the global instability; a 10% across-the-board duty will remain. For Canada and Mexico, goods covered by the U.S., Canada and Mexico trade agreement will continue to have no tariffs, while products that aren't exempt under the trade deal will have a 25% tariff. Canadian energy and fertilizer products will have a 10% tariff.
It wasn’t immediately clear which countries the pause would cover; the White House wouldn’t say. Earlier Wednesday, the European Union voted to impose fresh retaliatory duties, but they aren’t set to take effect until next week.
And separate tariffs on imported autos, steel and aluminum will remain, Treasury Secretary Scott Bessent said later — while planned tariffs on items like lumber and pharmaceuticals are still on.
It’s not clear what prompted Trump to change his mind — he appeared to dig in just hours earlier, telling Americans “BE COOL” in a Truth Social post, and he suggested not that long ago that the tariffs could be permanent.
“I did a 90-day pause for the people that didn’t retaliate, because I told them, ‘If you retaliate, we’re going to double it,’” Trump said Wednesday. “And that’s what I did with China, because they did retaliate. So we’ll see how it all works out. I think it’s going to work out amazing.”
But markets have been in stunning turmoil — major stock indexes shed trillions of dollars in value, while alarming signals from the bond market set Wall Street on edge.
When a false-at-the-time headline suggesting Trump would take a 90-day pause shot around the internet Monday, markets briefly surged. And a growing chorus of business leaders and Trump’s allies have come out publicly against the tariffs, including Tesla CEO Elon Musk.
Markets soared on the surprising news Wednesday, with the S&P 500 climbing more than 9%, the tech-heavy Nasdaq closing up more than 12% and the Dow Jones Industrial Average ending nearly 3,000 points higher. Among the big gainers: Tesla stock was up 22%. Despite the gains, all three indexes were down from where they were a month ago and at the start of the year, and some investors questioned what the recent volatility could mean for the U.S. stock market longer-term.
"My portfolio of defensive stocks is green so I don’t begrudge today’s market. But I ask you, would you want to own highly volatile US stocks whose price depends on whether POTUS had a good night’s sleep and woke up the next morning to reverse yesterday’s policies?" billionaire investor Bill Gross said on X.
Goldman Sachs lowered its odds of a recession but said it is still forecasting minimal economic growth and a 45% probability of a recession given the remaining tariffs.
Borrowing costs — which had surged early Wednesday as the tariffs took effect — also eased slightly, though not substantially, as some investors may fear a lingering fallout.
Trump has been talking about tariffs as the solution for U.S. economic problems since before he became president; he branded April 2 — when he unveiled the plan — “Liberation Day,” saying it would end decades of the country’s being “looted, pillaged, raped and plundered” by other countries.
The global markets recoiled, and last week $6.6 trillion alone was wiped out. Yet Trump and his allies had doubled down until Wednesday, arguing tariffs were necessary to return manufacturing to the United States and fill the nation’s coffers with trillions of dollars in revenue that could be used to pay down debt or offset tax cuts.
It’s not clear how the White House expects the policies to fuel big gains now. With the lower 10% tariff rate left in place, there will be less incentive for companies to relocate production to the United States and less revenue being generated.
After the news, Bessent sought to make the about-face into a negotiating tactic, insisting it was a way to scare countries to come to the negotiating table by demonstrating how high the United States was going to go.
“President Trump created maximum negotiating leverage for himself,” he said.
It’s unclear how successful the United States will be at negotiating new trade agreements with other countries given Trump’s on-again, off-again threats over the past several months. Previously, he had threatened sweeping tariffs on all imports from Mexico and Canada before he walked most of them back.
And while markets surged higher Wednesday following Trump’s pause, economic uncertainty remains over what will come next in the U.S. trade war with China, which exports more than $400 billion worth of goods to the United States each year.
Under Trump’s new tariffs, the cost for U.S. companies importing goods from China has more than doubled. Those products include everything from toys and sneakers to televisions and iPhones.
U.S. companies exporting their products to China are also caught up in the fray after China increased its tariffs on American goods like agriculture products and machinery. But the White House is downplaying that risk.
“What I am certain of is that what China is doing will affect their economy much more than ours because they have an export-driven, flood-the-world-with-cheap-exports model,” Bessent said.
Commerce Secretary Howard Lutnick said on X that he sat with Trump as he posted the initial message, adding: “The world is ready to work with President Trump to fix global trade, and China has chosen the opposite direction.”
The Trump administration will now face the daunting task of trying to negotiate dozens of potentially complex and intricate trade deals in a three-month period.
"That is a huge task to negotiate simultaneously with that many trading partners over that many issues,” said Greta Peisch, who was general counsel for the U.S. trade representative’s office during the Biden administration. “We have tariffs, non-tariff barriers, other non-trade related matters, all of those issues can get quite complicated quite quickly. Even with just a handful of trading partners, that would be a large undertaking."
