President Donald Trump announced a 90 day pause on his sweeping tariffs on Wednesday, giving all countries a 10% baseline except China, which will see even higher levies.
“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 wrote on Truth Social.
Saying that more than 75 countries had asked for negotiations over the tariffs, Trump said he “authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”
Trump’s turnabout on Wednesday, 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.
The upheaval erased trillions of dollars from stock markets and led to an unsettling surge in U.S. government bond yields that appeared to catch Trump’s attention.
“I thought that people were jumping a little bit out of line, they were getting yippy, you know,” Trump told reporters after the announcement, referring to the jitters sportspeople sometimes get.
U.S. stock indexes shot higher on the news, with the benchmark S&P 500 index closing 9.5% higher, and the relief continued into Asian trading on Thursday with Japan’s Nikkei index surging more than 8%.
European futures also pointed to big gains, but there were already signs the rally may be short-lived with U.S. stock futures trading lower. Oil prices also fell around 1%, extending a grim spell fuelled by fears that the trade tensions could push the global economy towards recession.
The EU had earlier on Wednesday launched its own counterattack, announcing measures targeting some US products in retaliation for American duties on global steel and aluminum exports.
The bloc, which Trump has accused of being created to “screw” the United States, will hit around €22 billion worth of US products, including soybeans, motorcycles and beauty products.
But the EU notably did not retaliate against the 20% US tariffs that had come into effect a minute after midnight on Wednesday.
Friedrich Merz, Germany’s likely next chancellor, said Trump’s pause was evidence of a united European approach to trade having a positive effect, and called for tariff-free US-EU trade.
“Europeans are determined to defend ourselves and this example shows that unity helps most of all,” he told TV show RTL Direkt in an interview following his conservative bloc’s sealing of a coalition deal with the Social Democrats.
“Let’s all set tariffs of 0% on transatlantic trade, and then the problem will be solved,” he added.