Trump’s Shocking Turn on Tariffs Focuses Trade War on China

The surprising decision by U.S. President Donald Trump to pause the large tariffs he had just imposed on dozens of countries led to a surge in affected global stock markets on Thursday, even after he intensified the trade war with China.

Trump’s reversal, announced on Wednesday, less than 24 hours after sharp new tariffs were imposed on most trading partners, followed the most intense episode of financial market volatility since the early days of the COVID-19 pandemic.

The reversal wiped trillions of dollars off the stock markets and led to a disturbing rise in U.S. Treasury yields, which seemingly caught Trump’s attention.

– I thought people were starting to get a little out of line, they were getting a little nervous, you know – Trump told reporters after the announcement.

U.S. stock indices rose following the news, with the benchmark S&P 500 finishing Wednesday up 9.5 percent, and the relief continued in Asian trading on Thursday with the Japanese Nikkei index rising by eight percent.

The European market also indicated significant gains, but there are already signs that the rise could be short-lived given the drop in futures contracts in the U.S. Oil prices also fell by about one percent, deepening fears that trade tensions could push the global economy towards recession.

Since returning to the White House in January, Trump has repeatedly threatened a series of punitive measures against trading partners, only to rescind some of them at the last minute. Such an erratic approach has confused world leaders and alarmed business executives.

U.S. Treasury Secretary Scott Bessent claimed that the withdrawal was always part of the plan to bring countries to the negotiating table. However, Trump later indicated that the significant market nervousness that developed since his announcements on April 2 influenced his thinking.

Although he insisted for days that his policy would never change, he told reporters on Wednesday: ‘You have to be flexible.’

He continues to exert pressure on China, the world’s second-largest economy and the second-largest importer to the U.S. Trump immediately raised the tariff on Chinese imports to 125 percent from the 104 percent level that took effect on Wednesday.

Chinese companies selling products on Amazon are preparing to raise prices for the U.S. or exit that market due to the ‘unprecedented blow’ of tariffs, said the head of the largest Chinese e-commerce association.

Beijing may respond in kind after it imposed an 84 percent tariff on imports from the U.S. on Wednesday in line with Trump’s earlier tariff strike. Chinese authorities have repeatedly stated that they will ‘fight to the end’ in the escalating trade war between the two leading world economies.

– The U.S. and China are currently playing a powerful game on the edge – said Chris Turner, global market leader at financial corporation ING.

Beijing has stated that it has held talks with the European Union and Malaysia to strengthen trade in response to the tensions. Australia says it has rejected China’s offer, its main trading partner, to work together to curb tariffs.

– We will not hold hands with China regarding any competition that is going on in the world – said Australian Deputy Prime Minister Richard Marles to Sky News.

Hopes for state support helped boost Chinese stocks on Thursday, although their currency, the yuan, fell to its lowest level since the global financial crisis.