Key Points
- Donald Trump has announced a 90-day pause on most country-specific tariffs.
- Trump said he would raise the tariff on Chinese imports to 125 per cent.
- US treasury secretary Scott Bessent said "this was his strategy all along".
World leaders and markets around the world have responded to United States President Donald Trump's announcement on Thursday that he would temporarily lower new tariffs on many countries, even as he raised them further on imports from China.
Trump's turnabout, 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 US government bond yields that appeared to catch Trump's attention.
"I saw last night that people were getting a little queasy," Trump told reporters following his announcement. "The bond market right now is beautiful."
Trump said he would raise the tariff on Chinese imports to 125 per cent from the 104 per cent level that took effect at midnight, further escalating a high-stakes confrontation between the world's two largest economies.
The heightened tariffs against China took effect at the same time on Thursday as retaliatory levies of 84 per cent slapped on by Beijing on US imports.
Trump said he would suspend targeted tariffs on other countries for three months to allow time for US officials to negotiate with countries that have sought to reduce them.
Trump's reversal on the country-specific tariffs is not absolute. A 10 per cent blanket duty on almost all US imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.
China asks US to meet it 'halfway'
China's commerce ministry warned the tariffs risked "severely" impacting the global economy, but stressed that "the door to dialogue is open".
"We hope the US will meet China halfway, and, based on the principles of mutual respect, peaceful coexistence and win-win cooperation, properly resolve differences through dialogue and consultation," commerce ministry spokeswoman He Yongqian said on Thursday.
Beijing's foreign ministry also warned the tariff hikes were going "against the whole world".
European Union putting counter-measures on hold
Later on Thursday, European Union Commission President Ursula von der Leyen said the EU would put its first counter-measures against Trump's tariffs on hold for 90 days.
"We took note of the announcement by President Trump. We want to give negotiations a chance," she wrote on X.
"While finalising the adoption of the EU countermeasures that saw strong support from our member states, we will put them on hold for 90 days."
Wall Street soars on tariff pause
Stocks on Wall Street rocketed in reaction to Trump's announcement that he was halting a levy hike for almost all nations for 90 days.
US stock indexes shot higher on the news, with the Dow Jones Industrial Average surging 7.9 per cent to 40,608.45 and the broad-based S&P 500 Index rallying 9.5 per cent to 5,456.90.
The tech-focused Nasdaq Composite Index jumped 12.2 per cent to 17,124.97.
In Australia, the share market , with Trump's tariff backflip returning more than $119 billion to the Australian share market's top-500 stocks.
Markets in Asia also rallied on Thursday, with Hong Kong, Tokyo, Indonesia and Singapore sharply higher. Taipei closed up a record 9.3 per cent.
Stocks in Chinese economic powerhouse Shanghai were also up, despite Trump's decision to further hike tariffs.
And in Europe, markets rebounded sharply on the pause.
Art Hogan, managing director of stock picking firm B. Riley Financial, said: "When markets are pricing in worst-case scenarios, it doesn't take much good news to turn that opinion around."
He said investors were waiting for any sign of a more reasonable trade process, adding the situation might "be less of a drag on economic activity and earnings".
But he cautioned that "China will become hyper-aware of the fact that they're now being isolated in this process".
Goldman Sachs cut its probability for a recession back to 45 per cent after Trump's move, down from 65 per cent, saying the tariffs left in place were still likely to result in a 15 per cent increase in the overall tariff rate.
'Maximum leverage'
US treasury secretary Scott Bessent said the administration needed time to negotiate with more than 75 countries that had reached out and suggested Trump had used the tariffs to create "maximum negotiating leverage for himself".
"This was his strategy all along," he told reporters at the White House. "And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor."
Bessent is the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters.
Trump has spoken with leaders of Japan and South Korea, and a delegation from Vietnam was due to meet with US officials on Wednesday.
Trump's announcement appeared to surprise US trade representative Jamieson Greer, who was testifying on Capitol Hill.
"I understand it's 90 days, I haven't spoken to the president," he told politicians.
Steven Horsford, a Democratic US representative, said: "It looks like your boss just pulled the rug out from under you and paused the tariffs, the taxes on the American people. There's no strategy."
