President Donald Trump announced a complete three-month pause on all the “reciprocal” tariffs that went into effect at midnight, with the exception of China, a stunning reversal from a president who had insisted historically high tariffs were here to stay.
But enormous tariffs will remain on China, the world’s second-largest economy. In fact, Trump said they will be increased to 125% from 104% after China announced additional retaliatory tariffs against the United States earlier Wednesday.
“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,” Trump said in his social media post. “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,” he wrote.
Wall Street breathed a sign of relief, however, that Trump was backing down on other extreme trade measures. Stocks rallied sharply on the news – even though the 10% universal tariff on all imports coming into the United States remained in effect.
Trump in a Truth Social post Wednesday said he has “authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”
Shortly after the announcement, Treasury Secretary Scott Bessent said the pause was part of “his strategy all along.” But he also said that Trump had “great courage to stay the course until this moment.”
CNN previously reported that Bessent traveled to Mar-a-Lago on Sunday to discuss the tariffs with Trump, encouraging him to focus on an endgame of reaching new deals with a variety of countries.
Bessent said Trump would be “personally involved” in all the discussions as he seeks out concessions.
“No one creates leverage for himself like President Trump,” Bessent said.
The message sought to cast to other countries was: “Do not retaliate and you will be rewarded,” he said, adding that the move “signals that President Trump cares about trade and that we want to negotiate in good faith.”
He and and Commerce Secretary Howard Lutnick were with Trump when he sent his message on Truth Social, Lutnick confirmed on a post on X.
“Scott Bessent and I sat with the President while he wrote one of the most extraordinary Truth posts of his Presidency,” Lutnick said. “The world is ready to work with President Trump to fix global trade, and China has chosen the opposite direction.”
Stocks rocketed higher on the news, with the Dow surging 2,200 points, or 5.9%. The S&P 500 rose 6.5% and the Nasdaq was more than 8% higher. Markets have been getting slammed by the prospect of the significantly higher tariffs Trump laid out last week.
Bessent didn’t offer many details on what could happen after the 90-day pause, but he said the administration will continue to have discussions with other countries in the interim. For example, he said US government officials are meeting with representatives from Vietnam on Wednesday.
“These are complicated negotiations,” he said. But having seen the “maximum level” that Trump is willing to go on tariffs, he feels more countries will be willing to give in.
Escalating tensions with China
The higher tariffs on China came after Beijing announced new retaliatory tariffs of 84% on US goods set to take effect on Thursday.
The Trump administration has taken particular aim at China’s trade practices.
“We will see what China does but what I’m certain of is what China is doing will affect their economy much more than ours,” Bessent said Wednesday.
Announcing China’s response, the State Council Tariff Commission said in a statement: “The US escalation of tariffs on China is a mistake upon mistake, severely infringing upon China’s legitimate rights and interests, and seriously damaging the multilateral trading system based on rules.”
The amped-up retaliation comes after China repeatedly warned that it would “fight to the end” if the US moved forward with further tariffs.
Pushing off a recession?
Economists significantly increased forecasts for a recession after Trump proceeded with the reciprocal tariff package, which called for tariffs as high as 50% impacting dozens of countries.
While the 90-day pause may have been welcome news to investors, it’s unlikely to stave off a recession, Joe Brusuelas, chief economist of RSM US, told CNN Wednesday.
“My sense here is that the [US] economy is still likely to fall into recession, given the level of simultaneous shocks that it’s absorbed,” Brusuelas said in an interview. “All this does is postpone temporarily what will likely be a series of punitive import taxes put on US trade allies.”
Jake Colvin, president of the National Foreign Trade Council, which represents a wide range of importers, said the pause is “a step in the right direction.”
But he cautioned, “Let’s not celebrate the fact that it still seems to leave in place a new baseline of 10% tariffs on most countries, plus significant levies on China, steel and aluminum and autos, with the promise of more duties to come.”
Colvin was referring to the 25% tariffs that remain in place on the three industries. Trump has also vowed to impose tariffs on a slew of other industries, including lumber, pharmaceuticals and copper.
Ultimately the pause does little to alleviate businesses of the uncertainty they’ve faced since Trump’s November victory regarding the tariff environment, he said.
