IRIA News

6 minute read

In a dramatic policy shift, U.S. President Donald Trump announced a temporary easing of the sweeping tariffs he had just imposed on dozens of countries, sending shockwaves to the global markets. The move came less than a day before the new tariffs were set to take effect.

Speaking to reporters on April 9, 2025, Trump appeared to acknowledge the market turbulence. “I thought that people were jumping a little bit out of line, they were getting yippy, you know,” he said, referencing a golf term to describe the panic that had gripped financial markets.

Trump’s decision to scale back the tariffs follows the most intense financial market upheaval since the onset of the COVID-19 pandemic.

Tariffs as an economic weapon

Since returning to the office in January, Trump has often used the threat of tariffs as leverage in trade negotiations, but his tendency to reverse course has left global leaders and business executives frustrated. The latest episode highlights the unpredictable nature of Trump’s trade policies and the confusion surrounding the decision-making process within his administration.

While the president insisted that the U.S. would maintain a tough stance, especially toward China, his decision to backtrack on certain country-specific tariffs marks a partial retreat. A 10% blanket duty on nearly all U.S. imports will still apply, and existing tariffs on steel, aluminum, and automobiles remain unchanged.

NEW TRUTH SOCIAL FROM PRESIDENT TRUMP:

🇨🇳125% TARIFF ON CHINA
🌎90-DAY PAUSE & LOWERED 10% RECIPROCAL TARIFF FOR OTHER COUNTRIES

🚨EFFECTIVE IMMEDIATELY pic.twitter.com/Gt5Bd6276m

— The White House (@WhiteHouse) April 9, 2025

The freeze also excludes Canada and Mexico from relief. Their goods are still subject to a 25% fentanyl-related tariff unless they meet the requirements of the U.S.-Mexico-Canada Agreement (USMCA). A White House spokesperson clarified that the exemption applies only to goods compliant with the agreement’s rules of origin.

“Strategy all along”

Despite Trump’s rhetoric about sticking to his strategy, Treasury Secretary Scott Bessent claimed the pullback was part of a broader plan. “This was his strategy all along,” Bessent said. “And you might even say that he goaded China into a bad position.” He added that the temporary freeze on some tariffs was meant to encourage other countries to come to the negotiating table without resorting to retaliation.

Trump reinforced his hardline position on China by announcing an increase in tariffs on Chinese imports from 104% to 125%, escalating a trade confrontation between the world’s two largest economies. The two nations have been engaged in a tit-for-tat exchange of tariff hikes over the past week, adding strain to already tense economic relations. The White House said that the total new tariffs on Chinese goods now stand at 145%.

Largely positive reactions

The announcement triggered an immediate positive reaction in global markets. The S&P 500 surged by 9.5%, reversing some of the losses from a record four-day decline that had wiped nearly $6 trillion from company valuations. U.S. Treasury yields, which had spiked during the selloff, stabilized, and the U.S. dollar rebounded against safe-haven currencies.

Asian markets followed suit, with Japan’s Nikkei index rising nearly 9% on Thursday. Still, analysts warn that the relief may be short-lived. Ongoing uncertainty surrounding U.S. trade policy and the potential for future reversals continues to weigh on investor sentiment.

Economic analysts have also noted real-world impacts beyond the markets. Business investment and consumer spending have shown signs of slowing due to concerns over rising prices and disrupted supply chains. A recent survey revealed that three out of four Americans expect prices to increase shortly.

Goldman Sachs, which had raised the risk of a U.S. recession to 65% earlier in the week, revised it down to 45% after Trump’s announcement. However, the investment bank cautioned that the remaining tariffs could still lead to a 15% increase in the overall tariff rate, maintaining pressure on the economy.

Trump insisted the decision to ease some tariffs was not a response to market pressure, but his public comments suggest otherwise. “You have to be flexible,” he said, signaling a shift from his earlier, more rigid stance.

The president also suggested that a resolution with China could be on the horizon, though administration officials indicated that negotiations with other countries would take priority. “China wants to make a deal,” Trump said. “They just don’t know how quite to go about it.”

China raises tariffs on American Goods from 84% to 125%

In a tit-for-tat move, China said it would impose a 125% tariff on US goods starting Saturday, up from the previous 84% in a further escalation of a trade war that threatens to bring exports to a halt between the world’s two biggest economies

Chinese Commerce Ministry spokesperson said the United States bore “full responsibility for this”, deriding Trump’s tariffs as a “numbers game” that “will become a joke”. The Chinese finance ministry said tariffs would not go any higher because “there is no possibility of market acceptance for US goods exported to China” — an acknowledgement that no imports are possible at the new level.

Earlier, China issued a strong warning in response to U.S. President Donald Trump’s decision to raise tariffs on Chinese imports to 125%. Beijing condemned the move as a threat to global economic stability and a violation of international norms. “The U.S. cause doesn’t win the support of the people and will end in failure,” said Chinese foreign ministry spokesperson Lin Jian during a regular press briefing.

Lin emphasized that China would not “sit back” while the rights and interests of its people are “deprived,” accusing Washington of undermining the global trading system. “American tariffs go against the whole world and seriously damage the rules-based multilateral trading system,” he added.

Echoing those concerns, commerce ministry spokeswoman He Yongqian urged the United States to engage in fair and respectful negotiations. “The door to dialogue is open, but it must be based on mutual respect and conducted in an equal manner,” she said.

While calling for cooperation, He made clear that China would defend its position if no agreement is reached. “We are ready to meet the U.S. halfway, but if needed, we will fight to the end,” she stated.

Talks with allies

Talks are already underway with Japan, South Korea, and Vietnam. The White House confirmed that a Vietnamese delegation met with U.S. officials on Wednesday to discuss trade matters. However, Bessent declined to estimate how long negotiations with over 75 countries might take.

Just days before his policy reversal, the White House had dismissed reports of a possible tariff pause as “fake news.” Yet on Wednesday, Trump reassured investors on his Truth Social account, writing, “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” He later added, “THIS IS A GREAT TIME TO BUY!!!”

Despite the optimism in markets, the larger question remains: can businesses, investors, and foreign governments rely on Trump’s policies going forward, or is more volatility ahead? For now, markets have taken a breather, but the unpredictability of U.S. trade policy under Trump remains a lingering concern.