Donald Trump triggered a wave of relief among investors last night after ‘pausing’ his global tariff war for 90 days.
In a dramatic climbdown, the US President said a blizzard of ‘reciprocal’ tariffs on countries worldwide would be put on hold to allow time for trade talks.
All nations except China now face a 10 per cent ‘baseline’ tariff on exports to the US for three months. But Mr Trump stepped up his trade war with Beijing, saying tariffs on Chinese goods would soar to 125 per cent after China responded with its own retaliatory tariffs.
Critics said last night that Mr Trump ‘blinked first’ just 24 hours after the White House said he had ‘a spine of steel that he will not break’.
He acknowledged that market turmoil had played a part in his decision to back down, telling reporters: ‘People were getting a little bit yippy, a little bit out of line.’
He insisted all countries, including China, would eventually agree ‘fair’ trade deals and put the US on a ‘transition to greatness’, but warned: ‘Nothing’s over yet.’
In the US, the Dow Jones index leapt by 6 per cent within minutes.
The climbdown came after bond-market investors began an unprecedented sell-off of US government debt, driving up borrowing rates for the Trump administration.
In a dramatic climbdown, US President Donald Trump said a blizzard of ‘reciprocal’ tariffs on countries worldwide would be put on hold to allow time for trade talks
Trump’s tariff plans caused a major sell-off of US government bonds
Britain was also hit by the fallout, with the UK Government’s borrowing costs hitting their highest since 1998, raising the prospect of more tax rises and spending cuts.
After claiming that world leaders were ‘calling me up, kissing my ass…’, Mr Trump later urged American voters to ‘be cool’, saying: ‘Everything is going to work out well.’
But four hours later he ordered the tariff pause and sent US Treasury Secretary Scott Bessent to defend it at a White House press conference.
Mr Bessent claimed Mr Trump only ever intended to use the threat of tariffs against the rest of the world to generate ‘maximum negotiating leverage’. But he said China had revealed itself as the ‘bad actor’ in global trade by retaliating.
Press secretary Karoline Leavitt also made out that the past week of turmoil, which wiped trillions of dollars off the markets, was part of the plan, telling reporters: ‘Many of you in the media clearly missed the art of the deal. You clearly failed to see what President Trump is doing here.’
Last night, Mr Trump said there was ‘a lot of winning out there’, ‘we’re having a good day in the stock market’ and the US was ‘stronger than it’s ever been’. He added: ‘We had to take the medicine… to go through the operation.’
His tariffs briefly came into full effect yesterday, exactly one week after his ‘Liberation Day’ announcement stunned global markets. China was hit with an additional 50 per cent levy after retaliating, taking the total US tariff on Chinese goods to 104 per cent.
China, which has vowed to ‘fight to the end’, responded with an extra 50 per cent levy on US imports, taking its own total tariff rate to 84 per cent. Beijing described Mr Trump’s approach as ‘a mistake on top of a mistake’.
Trump said he was raising tariffs on Chinese goods to 125 per cent immediately thanks to Beijing’s ‘lack of respect’
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Hedge fund billionaire Bill Ackman, who first floated the idea of a 90-day pause, warned publicly yesterday that the US economy would be punished if the President failed to intervene, adding: ‘Our stock market is down. Bond yields are up and the dollar is declining. These are not the markers of successful policy.’
The policy switch still leaves the world’s two biggest economies locked in a deepening trade war.
Mr Trump said he was raising tariffs on Chinese goods to 125 per cent immediately thanks to Beijing’s ‘lack of respect’.
Mr Bessent said Beijing’s policy of ‘escalating’ the trade dispute would backfire. ‘They sell us almost five times as much as we sell them so I think it’s an own goal by China,’ he said.
He said talks would begin with more than 75 countries that want better trade terms.
Mr Trump’s decision means heavier ‘reciprocal’ tariffs will be temporarily cut to 10 per cent. This will benefit the EU, which faced a 20 per cent rate, as well as countries such as India (26 per cent) and Vietnam (46 per cent).
It will make no difference to the UK, which was already on the 10 per cent baseline.
Higher 25 per cent tariffs also remain in place on cars and on steel and aluminium.
Former Cabinet minister Kit Malthouse said any imposition of tariffs on pharmaceuticals would backfire on the US.
The chairman of the all-party group on life sciences added: ‘As a life sciences superpower, the UK is able to offer Americans hope in the fight against awful ailments. Why on earth would you tax these scientific miracles at your own border?’
Downing Street said: ‘A trade war is in nobody’s interests. We don’t want tariffs at all, so for jobs and livelihoods across the UK, we will coolly and calmly continue to negotiate in Britain’s interests.’
