Trump announces pause in ‘reciprocal’ tariffs for all countries but China

President Donald Trump on Wednesday paused his new tariffs on most imports, sparking a swift rally in the stock market even as he escalated a U.S. trade war with China.

In a midday post on Truth Social, Trump said new tariffs of 125% on Chinese imports would take effect immediately, hiking them from 104%. He also said more than 75 other countries – set to face what the White House calls “reciprocal tariffs” – have been negotiating and would immediately see their levies set to 10% for 90 days, rather than higher rates announced a week ago.

“Everybody wants to make a deal, actually,” Trump said from the White House on Wednesday afternoon. “And, you know, we want to do what’s right for our country. We also want to do what’s right for the world. The world is important.” He added that he was open to meeting with Chinese leader Xi Jinping but “they haven’t treated our country right.”

Major stock indexes climbed rapidly, after they’d mostly slid over the past week. The widely followed S&P 500 closed up 9.5% and clinched its best rally since 2008. The narrower Dow Jones Industrial Average rose nearly 8%, and the tech-heavy Nasdaq composite index popped 12%. Trading was heavy Wednesday, closing out with more than 2.2 billion shares traded.

“What you’re seeing is a once-in-a-lifetime ‘relief rally’ on hopes – and I use that word tentatively – that that pause will turn into a permanent removal of the haphazard punitive tariffs that were applied to America’s global trade partners,” said Joe Brusuelas, chief economist at RSM. But, he added, “It still does not remove the risk of recession from the table.”

Some U.S. companies Wednesday had started warning of a cloudy economic picture, and a number of major Wall Street firms forecast that a downturn would be the likeliest outcome of an all-out trade war. That outlook improved somewhat: Economists at Goldman Sachs began the day projecting a 65% chance of a recession. After Trump’s pivot, they pared that estimate back to 45%.

Still, firms and entire industries have had to repeatedly adjust as trade rules change. Walmart cited tariff risks as a reason for backing away from its previous target for first-quarter profit growth. Delta Air Lines pulled its earnings forecast for the year because of “broad economic uncertainty around global trade.”

“There has been so much uncertainty – things are evolving by the day – that businesses just don’t know what to do or how to plan,” Bart Watson, president of the Brewers Association, a trade association for the craft beer industry, said Tuesday. “Every time things change, it’s another straw on a camel’s back that already has a lot of straws on it.”

Although the group’s members make beer in the United States, they rely heavily on international supplies – including barley and malt from Canada and hops from Europe and Australia. Many also depend on international suppliers for kegs and aluminum cans.

Shrimpers, meanwhile, generally lauded the administration’s approach as a way to boost investment in U.S. aquaculture and shift away from foreign competitors that could sell their products for less. John Williams, executive director of the Southern Shrimp Alliance, said that hope still held even under a revamped tariff regime with lower rates for some countries than Trump initially announced.

“For shrimpers, tariffs respond to an urgent need to offset unfair trade,” Williams said in a statement. “Failing to act immediately risks outsourcing America’s most consumed seafood to industries that engage in horrible practices and losing our commercial domestic shrimp industry.”

China had raised tariffs on U.S. imports to 84% overnight, retaliating for U.S. tariffs on Chinese goods that kicked in at midnight. The announcement Wednesday didn’t change tariffs on Canada or Mexico. Tariffs on specific industries and commodities such as steel, aluminum and automobiles also did not change.

Diane Swonk, chief economist at KPMG, said the market celebration veiled the fact that higher tariffs on China, plus the 10% rate elsewhere, still mean a higher overall effective tariff rate than what existed April 2.

“That’s what’s being lost in translation,” Swonk said. “The two together actually take us higher than we were.”

The significant policy shift came after the 10-year U.S. Treasury bond sold off heavily earlier in the morning. Those bonds are typically seen as a safe haven when markets are unsettled and rose sharply to more than 4.5% before retreating somewhat. Yields move inversely to prices, meaning investors are quickly selling U.S. bonds.

“I was watching the bond market,” Trump told reporters after his announcement sent the markets soaring. “The bond market is very tricky. But if you look at it now, it’s beautiful.”

Treasury Secretary Scott Bessent told reporters that Trump would be personally involved in negotiating trade deals with individual countries, which would be “bespoke” and tailored for each nation. Bessent said Trump created “maximum negotiating leverage” and praised the president’s willingness to face major economic pressure to force other countries to reach a deal. The remarks came after Bessent had tried earlier in the day to tamp down fears about the bond market.

“This was his strategy all along,” Bessent said, adding, “You might even say he goaded China into a bad position – they have shown themselves to the world to be the bad actors.”

Bessent said sector-specific tariffs being considered by the White House, on industries such as pharmaceutical and lumber imports, would not be affected by the pause Trump announced Wednesday. He said the administration would be meeting with Vietnam on Wednesday and had also been in discussions with Japanese officials.

“No one creates leverage for himself like President Trump,” Bessent said. “We’ve been overwhelmed – overwhelmed – by the response, mostly by our allies, who want to come and negotiate in good faith.”

Commerce Secretary Howard Lutnick said on social media that he and Bessent were sitting with Trump while he wrote the Truth Social post announcing the delay. Lutnick called it “one of the most extraordinary Truth posts of his Presidency.”

Before Trump’s announcement, the bond market’s woes had raised fears that the U.S. may be in the early stages of financial turmoil that could prove difficult for the Federal Reserve or other agencies to resolve. Typically, investors flee to Treasurys during market panics because the U.S. government is viewed as among the safest investments in the world. But the rise in yields this time appeared to scramble that story, suggesting at least some drop in confidence in the Treasury Department’s ability to repay its obligations.

The U.S. government relies on cheap borrowing rates to run massive annual deficits, which enable high levels of spending and low taxation. Higher bond rates could make it far more expensive to finance federal debt, forcing major tax hikes or cuts to spending. Lending throughout the economy is also tied to U.S. Treasury rates. That means the costs of loans for mortgages, cars and other goods could go up – even as the nation overall faces an economic slowdown.

Although markets surged on the news, the pause could compromise the president’s other trade promises. The White House had said the tariffs could raise more than $6 trillion in revenue to fund tax cuts and other priorities – an impossibility with most of the import duties being paused or rolled back.

Before the policy change, experts said the administration was courting disaster in a cornerstone of the U.S. economy if it did not reverse course. Some experts have even expressed concern the U.S. is heading toward a replay of the 2022 financial crisis in the United Kingdom, triggered by then-Prime Minister Liz Truss, in which a loss of faith led to a collapsing value of the British pound and Truss’ rapid resignation.

Canada’s tariffs of 25% on U.S. autos took effect Wednesday, matching U.S. tariffs on autos and auto parts. The European Union issued tariffs of its own with 25% duties on some U.S. products. European markets sold off overnight, with London’s FTSE 100, France’s CAC index and Germany’s DAX each down roughly 3%.

In Asia, Japan’s Nikkei 225 lost 4%, while South Korea’s KOSPI ended the day roughly 2% lower. Hong Kong’s Hang Seng Index, which lists many Chinese exporters, fell sharply as trading opened there Wednesday but recovered to eke out a modest gain of 0.7%.

Oil prices tend to fall when markets anticipate lower economic activity. The West Texas intermediate crude index was down earlier in the day but rallied after Trump’s announcement.