Trump pauses tariffs for 90 days but hits China harder

WASHINGTON: United States President Donald Trump's stunning decision to pause most of the hefty duties he had just imposed on dozens of countries brought relief to battered global markets and anxious European leaders, even as he ratcheted up a trade war with China.

Trump's turnabout, 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.

US stock indexes shot higher on the news, and the relief continued into Asian and European trading on Thursday (Apr 10).

Before Trump's U-turn, the upheaval had erased trillions of dollars from stock markets and led to an unsettling surge in US government bond yields that appeared to catch the US president's attention.

"I saw last night that people were getting a little queasy," Trump told reporters following his announcement. "The bond market right now is beautiful.

"I thought that people were jumping a little bit out of line, they were getting yippy, you know," he added, 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.

While European Commission chief President Ursula von der Leyen and other European leaders welcomed Trump's latest move and said they hoped for constructive negotiations, China rejected what it called threats and blackmail from Washington.

Trump has kept the pressure on the world's No 2 economy and second-biggest provider of US imports with an increase of tariffs on Chinese imports to 125 per cent from the 104 per cent level that kicked in on Wednesday.

This comes on top of the 20 per cent levy he imposed on Chinese goods earlier in the year over the flow of fentanyl from China to the US. 

The two countries have traded tit-for-tat tariff hikes repeatedly over the past week.

The events following the US president's announcement 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 Apr 2 announcements had factored into his thinking. Despite insisting for days that his policies would never change, he told reporters on Wednesday: "You have to be flexible."

Trump's reversal on the country-specific tariffs is not absolute. A 10 per cent 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 per cent 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.

TRADE WAR

A spokesperson from China's Commerce Ministry warned on Thursday that Beijing will "follow through to the end" if the US insists on its own way. China's door was open to dialogue, but this must be based on mutual respect, the ministry said.

"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.

Gary Clyde Hufbauer, non-resident senior fellow at Washington-based think tank Peterson Institute for International Economics, told CNA's Asia First that trade between Washington and Beijing "is going to drop very sharply".

"I'll be surprised if we have more than US$200 billion of two-way trade during 2025 in light of these mutual tariffs," Hufbauer added. US total goods trade with China were an estimated US$582 billion last year.

"China is in a stronger position than the US in this battle, because they don't have inflation, and the US has an inflation problem. The leaders in China are (also) less concerned about the stock market than our leaders. That gives China stronger playing cards in this game of poker."

Beijing may again respond in kind after imposing 84 per cent tariffs on US imports on Wednesday to match Trump's earlier tariff salvo.

"We don't back down," Mao Ning, a foreign ministry spokesperson, posted earlier on X on Thursday, sharing a video of a defiant speech by late Chinese leader Mao Zedong from 1953 during its war with the US on the Korean peninsula.

The Korean War ended in a stalemate later that year.

MARKET RESPONSE

US stock indexes shot higher on the news, with the benchmark S&P 500 index closing 9.5 per cent higher. Bond yields came off earlier highs, and the dollar rebounded against safe-haven currencies.

China and Hong Kong shares also ended higher on Thursday, as investors played down the latest US tariff increase on Chinese imports and pinned their hopes on talks between the world's two largest economies, as well as on market and policy support from state firms.

China's blue-chip CSI300 Index closed 1.3 per cent higher, while the Shanghai Composite Index rose 1.2 per cent. Hong Kong's benchmark Hang Seng was up 2.1 per cent.

Tokyo's benchmark Nikkei index closed up 9.12 per cent, while the broader Topix index gained 8.09 per cent.

Singapore's benchmark STI went up by more than 8 per cent in early trade, although this moderated to 5.3 per cent at the close.

Trump's tariffs had sparked a days-long selloff that erased trillions of dollars from global stocks and pressured US Treasury bonds and the dollar, which form the backbone of the global financial system. Canada and Japan said they would step in to provide stability if needed - a task usually performed by the US during times of economic crisis.

Analysts said the sudden spike in share prices might not undo all of the damage. Surveys have found slowing business investment and household spending due to worries about the impact of the tariffs, and a Reuters/Ipsos survey found that three out of four Americans expect prices to increase in the months ahead.

Goldman Sachs cut its probability of a recession back to 45 per cent after Trump's move, down from 65 per cent, saying the tariffs left in place were still likely to result in a 15 per cent increase in the overall tariff rate.

Treasury Secretary Bessent shrugged off questions about market turmoil and said the abrupt reversal rewarded countries that had heeded Trump's advice to refrain from retaliation. He suggested Trump had used the tariffs to create “maximum negotiating leverage for himself”.

"This was his strategy all along," Bessent told reporters. “And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor.”

Bessent is the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters. Trump has spoken with leaders of Japan and South Korea, and a delegation from Vietnam was due to meet with US officials on Wednesday.

Bessent declined to say how long negotiations with the more than 75 countries that have reached out might take.

Trump said a resolution with China was possible as well. But officials have said they will prioritise talks with other countries.

"China wants to make a deal," Trump said. "They just don't know how quite to go about it."

Trump told reporters that he had been considering a pause for several days. On Monday, the White House denounced a report that the administration was considering such a move, calling it "fake news".

Earlier on Wednesday, before the announcement, Trump tried to reassure investors, posting on his Truth Social account, "BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!"

Later, he added: "THIS IS A GREAT TIME TO BUY!!!"

Peterson Institute for International Economics' Hufbauer called the 90-day pause “policy by Trump’s instinct”.

“The stock market and the bond market would be very much against (Trump), and also the fear of inflation in the US from ordinary people,” Hufbauer said.

“He didn't believe this when he started off on Apr 2 with these blockbuster tariffs, but the markets taught him a lesson. He's an agile politician, so he shifted his message very dramatically,” added the economist.

Mark Matthews, Asia head of research at Swiss private bank Julius Baer, said there were two scenarios with the tariffs: Trump being serious about keeping them in place, or the more likely situation - Trump “just playing hardball all along” to strike deals.

He quoted from Trump's 1987 book The Art of the Deal, where the president wrote that he keeps "pushing to get what I'm after" and "still end up with what I want" in most cases despite having to occasionally settle for less.

"That's what it's looking like now. I think most countries are thinking: 'Trump is very difficult, but he's probably a temporary aberration'," Matthews added.