President Trump stunned market observers with another quick pivot on trade, announcing he would authorize a 90-day pause on his reciprocal tariff plans for all countries except China and telling reporters he did so because people were getting “yippy” and “afraid.”
“They were getting a little bit yippy, a little bit afraid,” he said, apparently referring to the market unrest that unfolded following his “Liberation Day” tariff announcement a week ago.
He did, however, keep the 10% baseline duties that went into effect last weekend for all countries, although that does not apply to Mexico or Canada, which still face a separate set of duties related to fentanyl. Separate industry-specific tariffs on steel, aluminum, autos remain unchanged.
The president’s pause of “reciprocal” tariffs does not apply to one country: China. Instead, Trump announced he would be unilaterally raising the rate on China further to 125% because of “the lack of respect that China has shown.”
Trump additionally told reporters Wednesday afternoon that he might consider exempting some US companies from the tariffs, saying those decisions would be made “instinctively.”
President Donald Trump speaks during an event on energy production in the East Room of the White House, on Tuesday. (AP Photo/Evan Vucci) ·ASSOCIATED PRESS
The market relief was immediately evident, with the S&P 500 spiking by 9% — its best day since 2008.
It was another chaotic pivot in Trump’s ever shifting tariff plans and came less than an hour after Treasury Secretary Scott Bessent told reporters that the president’s decision had nothing to do with the turmoil in both the stock and bond markets of the past week, saying that “this was his strategy all along.”
More than 75 countries have contacted the US to start talks on the reciprocal tariffs, Bessent added, and thus the 90-day pause allows the US to create a “bespoke” solution for all of them.
“It’s just [a] processing problem,” he said.
But Trump seemed to acknowledge the market reaction was part of his calculus for announcing the pause, saying he noticed last night in the the bond market that “people were getting a little queasy” and “you have to be flexible.”
The decision from Trump also came after he posted on social media that it was a “great time to buy” and urged his followers to “stay cool.”
Treasury Secretary Scott Bessent speaks to reporters outside the West Wing of the White House, on Wednesday. (AP Photo/Jacquelyn Martin) ·ASSOCIATED PRESS
The move puts also even more focus on China as the White House appears to try to isolate the world’s second largest economy by beginning talks with China’s neighbors while continuing to raise duties faced by China itself.
“China is the most imbalanced economy in the history of the world,” Bessent added to reporters Wednesday afternoon, calling it the “biggest source” of US trade troubles.
It was not immediately clear what the effect would be on places like the European Union, which announced its own reciprocal tariff plans in recent hours but went unmentioned in Trump’s post. Bessent didn’t respond to shouted questions from reporters on that topic and a White House spokesperson didn’t immediately respond to a request for clarity.
Either way, it was yet another shocking turn in Trump’s second-term trade agenda that came after new duties went into effect at 12:01 a.m. ET with historic double-digit duties on America’s allies and a 104% base rate on Chinese goods.
“These Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Trump posted.
The president also announced he would be unilaterally raising the rate on China further to 125% because of “the lack of respect that China has shown.”
Terry Haines of Pangaea Policy added in the immediate aftermath of the news that another fact that could be boosting markets is that now “Bessent is the main adviser, while [Commerce Secretary Howard] Lutnick is in charge of the negotiating details, something that’s likely soothing to the Street.”
It was a partial reversal of what economic observers warned could move pocketbooks, with a new Yale Budget Lab study released Tuesday estimating that the tariffs could push prices up by 2.3% and translate to an average of $3,800 more in costs this year for families.
Around the world, 185 countries have been impacted by new 10% duties unveiled last week, and those duties appear set to continue.
Trump and his aides have repeatedly touted that countries have called to negotiate, with Bessent saying they are “overwhelmed.”
Japan, South Korea, and Vietnam are apparently first in line with talks commencing this week. Other talks could drag out for weeks or months with the timeline unclear, especially if they will be finished before the 90-day pause ends in July.
As for the path ahead for still jittery markets, Bessent added that “the only certainty we can provide is that the US is going to negotiate in good faith.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
