On Wednesday morning, President Donald Trump announced a 90-day pause on reciprocal tariffs, with the exception of China, whose tariffs will rise to 125%. This move came just one week after the declaration of his “Liberation Day” tariffs and mere hours after they went into effect.
Treasury Secretary Scott Bessent framed President Trump’s pause on some tariffs as a major victory as well as a demonstration of Trump’s negotiating skill, asserting that the move was driven by the overwhelming response from over 75 U.S. allies seeking negotiation. In a press conference, Bessent stated, “It was the president’s decision to wait until today. No one creates leverage for himself like President Trump.”
As a result of President Trump’s indication of willingness to negotiate on trade, U.S stocks staged a historic market surge following a week of heightened volatility, with market capitalization increasing by a record $5.1 trillion. The S&P 500 posted its best day since the financial crisis of 2008, jumping 9.5%. The Dow Jones Industrial Average rose by more than 2,900 points while the Nasdaq Composite surged by 12.2%.
Moreover, concerns within the Treasury Department over signs of distress in the U.S. government bond market were a major influence in President Trump’s decision to pause his reciprocal tariff regime. Scott Bessent conveyed these concerns over the growing selloff in the U.S. Treasuries to Trump. During times of economic uncertainty, Treasuries are considered a dependable source of safety for investors due to their reputation as low-risk assets backed by the fiscal stability of the U.S government. However, a decline in Treasury prices prompted fears regarding the stability of U.S. economic and security alliances, which were exacerbated by tariffs.
President Trump’s pause on reciprocal tariffs is expected to provide significant relief to American consumers by stabilizing the cost of goods that would be affected. Harry O’Sullivan, leader of Convent & Stuart Hall’s political engagement club, remarked, “Lifting the tariffs will lower costs for consumers and businesses, making everyday commodities more affordable. It will also strengthen global trade partnerships and foster cooperation and economic stability.”
Although the tariff pause brings a reprieve to several U.S. allies, China remains under U.S. pressure, with tariffs escalating to 125%. President Trump wrote on Truth Social, “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. 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.”
Scott Bessent articulated that China is an exception to Trump’s easing “due to their insistence on escalation.” The escalation Bessent is referring to is China raising its tariffs on U.S. products from 34% to 84% after Trump’s 104% tariffs on China came into effect overnight Wednesday.
In an interview with CNBC, Bessent commented, “I think it was a big mistake, this Chinese escalation, because they’re playing with a pair of twos. Traditionally, if you look at the history of the trade negotiations, we are the deficit country. So what do we lose by the Chinese raising tariffs on us? We export one fifth of what they export to us, so that is a losing hand for them.” What this means is that China relies heavily on the American market, as the U.S. imports far more from China than it exports to China. In 2024, the U.S. imported over $438.9 billion worth of goods from China while it exported around approximately $143.5 billion worth of goods to China. Americans are dependent on access to Chinese-made goods due to the fact that the U.S. has outsourced much of its manufacturing to the Chinese. However, with regard to tariffs, the U.S. holds a competitive advantage due to this trade deficit with China.
Additionally, tariffs and other sanctions on China remain crucial to promoting fair trade and ensuring American economic and strategic interests. For several years, both GOP and Democratic politicians have called for action against China’s unfair trade practices and its violations of WTO regulations, including intellectual property theft, currency manipulation, dumping, and illegally subsidizing steel and aluminum.
While the rise in tariffs could lead to higher prices on Chinese-made commodities, the impact may be mitigated by companies’ ability to invest in domestic production. For instance, Apple, whose products are primarily assembled in China, has committed an investment of $500 billion into the U.S. economy. Such investments coupled with Trump’s broader notion of reshoring could offset the potential price increases.
President Trump’s decision to postpone most tariffs, while escalating tensions with China, marks a significant juncture in U.S. Trade policy. The move aims to gain leverage in trade negotiations with U.S allies. It has also resulted in a massive surge in stock prices. As tensions with China mount, the U.S. attempts to promote fairer trade practices and protect its own national interests. This decision ultimately sets the stage for a broader shift in world trade dynamics as the United States cements its position as the global hegemon.