Trump stuns world with 90-day tariff pause—then slams China with 125% duty as stocks rebound

In a dramatic policy shift that sent shockwaves through global financial markets, U.S. President Donald Trump announced a temporary 90-day suspension of sweeping new tariffs imposed on dozens of countries, even as he sharply escalated duties on Chinese imports. The reversal, which unfolded just hours after the tariffs had taken effect, came amid heightened financial turmoil that saw trillions of dollars wiped from stock markets and triggered the sharpest spike in U.S. Treasury yields since the onset of the COVID-19 pandemic.

The pause on duties applies to a broad range of U.S. trading partners but excludes China, Mexico, and Canada under current provisions. Trump’s announcement signaled a strategic recalibration intended to reduce immediate global backlash while maintaining intense pressure on Beijing, the United States’ second-largest source of imports.

Trump, who returned to office in January 2025 for a second term, had aggressively pursued a protectionist agenda, reviving elements of his first-term trade strategy. The latest round of tariffs, unveiled on April 2, targeted nearly all U.S. trading partners with a 10% blanket duty, in addition to previously existing measures on autos, steel, and aluminum. However, the near-immediate backlash from the markets prompted a reassessment.

How did financial markets react to Trump’s tariff reversal?

Global equity markets staged a dramatic recovery following Trump’s announcement, with the S&P 500 Index closing up 9.5%—its largest single-day gain in nearly two decades. The rally followed four days of historic losses that erased nearly $6 trillion in market value from S&P 500 companies alone, marking the worst stretch for the benchmark since the 1950s.

Investor sentiment had been rattled by fears of a global trade war, amplified by tit-for-tat tariff escalations between the U.S. and China and the prospect of retaliatory measures from allies. The surge in bond yields added to the instability, as higher borrowing costs threatened to undermine corporate investment and consumer spending.

Trump’s decision to freeze some of the newly imposed duties appeared to offer a reprieve, not just to trading partners, but also to financial markets struggling with the uncertainty. Bond yields came off their highs, the U.S. dollar strengthened against safe-haven currencies like the Japanese yen and Swiss franc, and commodities including crude oil rebounded sharply.

What triggered Trump’s sudden policy change on trade tariffs?

The about-face underscores the unpredictability that has come to define Trump’s trade policy. Treasury Secretary Scott Bessent suggested the decision to pause certain tariffs had been part of a broader strategy to bring countries to the negotiating table. However, Trump later admitted that the scale of the financial upheaval likely influenced the timing and nature of the announcement.

Speaking to reporters at the White House, Trump remarked that investors and businesses had “gotten yippy,” borrowing a golf term to describe market panic. He reiterated his belief in being “flexible,” despite having previously insisted that his trade policy would not shift under pressure. The remarks highlight a tactical approach in which Trump seeks maximum leverage by initially imposing steep tariffs, then adjusting them based on reactions from markets and governments.

According to market analysts, the administration may have underestimated how rapidly investor sentiment could deteriorate. The speed and magnitude of the global sell-off, coupled with surveys showing slowing capital expenditure and household consumption, likely forced the administration’s hand. A Reuters/Ipsos poll conducted during the tariff rollout revealed that three out of four Americans anticipated higher prices in the months ahead, reflecting concerns about inflationary pressure from increased import costs.

How does this impact the ongoing U.S.-China trade tensions?

While Trump signaled flexibility on tariffs applied to most nations, his administration doubled down on its aggressive stance toward China. The tariff rate on Chinese imports was raised to 125%, up from the 104% level that had only just taken effect at midnight. This escalation follows a series of retaliatory moves from Beijing, including increased duties on U.S. agricultural goods and technology exports, as well as newly announced sanctions on 18 American firms.

The U.S.-China trade dispute has its roots in longstanding concerns over market access, intellectual property theft, and industrial subsidies. During his first term, Trump used tariffs as leverage to force China into a partial trade deal in 2020, but the agreement left several contentious issues unresolved. With both sides now entrenched in a high-stakes confrontation, prospects for a comprehensive resolution appear uncertain.

Daniel Russel, a senior fellow at the Asia Society Policy Institute and a former U.S. diplomat, said Beijing likely sees Trump’s moves as consistent with a strategy to provoke, rather than negotiate. He noted that China has traditionally opted to absorb economic pressure while avoiding overt concessions, believing that capitulation invites further demands.

What is the status of tariffs on Canada, Mexico, and other U.S. partners?

Although the 90-day tariff suspension applies to many countries, it does not extend to all. Goods from Canada and Mexico remain subject to a 25% fentanyl-related tariff unless they comply with the terms of the U.S.-Mexico-Canada Agreement (USMCA), particularly its rules of origin. These duties, designed to pressure Mexico over drug trafficking concerns, remain a point of tension between the three North American partners.

The White House confirmed that the general 10% blanket duty on imports would also remain in place during the pause, excluding specific goods such as autos, steel, and aluminum that are already subject to separate tariffs. The carve-outs reflect the administration’s continued interest in protecting key domestic industries, even as it seeks broader trade talks.

Treasury Secretary Bessent, who is leading bilateral negotiations with more than 75 countries that have reached out since the tariff announcement, indicated that discussions may also encompass military cooperation and foreign aid in addition to economic matters. However, he declined to provide a timeline for how long these talks might take.

What is Trump’s broader strategy behind this tariff policy shift?

Trump’s trade playbook appears to blend economic nationalism with realpolitik negotiation tactics. By initiating severe tariffs and then selectively suspending them, the administration aims to pressure trading partners into concessions while retaining the option to reimpose duties if talks stall.

This on-again, off-again strategy was a hallmark of Trump’s first term and has re-emerged in his second. In the past, he imposed steel and aluminum tariffs on allies like the European Union and South Korea, only to lift or revise them after securing side agreements. While the tactics have occasionally yielded short-term wins, business leaders and foreign governments have criticized the lack of consistency and the disruption to long-term investment planning.

Indeed, G7 members excluding the U.S. are reportedly exploring coordinated responses to mitigate the effects of American trade unpredictability. South Korea’s trade envoy, Cheong In-kyo, said Trump’s tariff pause offered a chance for dialogue but urged Washington to consider the broader consequences of unilateral trade action.

Trump, meanwhile, hinted at his broader vision through social media, posting on Truth Social that the current period represented a “GREAT TIME TO BUY,” suggesting he sees the volatility as temporary. In another post, he wrote, “The USA will be bigger and better than ever before!”—a slogan reminiscent of his 2016 campaign.

Where do trade negotiations go from here?

While Trump claimed China “wants to make a deal,” U.S. officials privately suggested they would prioritize negotiations with other countries before re-engaging with Beijing. A Vietnamese delegation met with U.S. trade officials shortly after the announcement, and talks with Japan and South Korea are reportedly underway.

The next 90 days will serve as a crucial test for Trump’s strategy. If the temporary tariff relief spurs meaningful concessions, it may validate his hardline approach. However, if uncertainty persists and economic conditions deteriorate, the administration could face increasing pressure—both at home and abroad—to revise its stance.

With global supply chains already reeling from geopolitical disruptions and inflationary pressures, the world will be watching closely to see whether Trump’s gamble leads to negotiated settlements—or reignites the trade war fires that have smouldered since 2018.