US President Donald Trump’s abrupt decision to implement a 90-day pause on the tariffs he imposed on dozens of countries has sent battered stock markets surging, even as he ratcheted up his trade war with China.
Trump’s turnaround on Wednesday, which came just 13 hours after the duties had gone into effect, followed the most intense episode of financial market volatility since the COVID-19 pandemic.
Stocks soared following Trump’s announcement of a pause on some tariffs. The S&P 500 jumped 9.5 percent on Wednesday, the index’s biggest single-day leap since 2008. Oil prices, which slid in recent days on fears of a global recession, also rallied on the news.
Still, not all of Trump’s tariffs have been lifted. A 10 percent levy on most countries remains in place. Meanwhile, the United States escalated its trade war with China, raising tariffs to a whopping 125 percent – deepening an economic crisis between the world’s two largest economies.
What are Trump’s latest moves?
On Wednesday, Trump announced a 90-day pause on “reciprocal” tariffs for almost 60 countries and the European Union. The tariffs were customised for each country and corresponded to the size of their trade surplus with the US.
Imports from those countries will now be subject to a flat tax of 10 percent, which Trump introduced on April 5. China was not included in the pause.
Instead, Trump announced that he would raise levies on Chinese goods to 125 percent, from 104 percent. Trump’s decision came after Beijing announced plans to retaliate with an 84 percent duty on American goods on Wednesday.
World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala has said the tensions “pose a significant risk of a sharp contraction in bilateral trade” between the US and China.
“Our preliminary projections suggest that merchandise trade between these two economies could decrease by as much as 80 percent,” she said in a statement on April 9.
What did Trump actually say?
At a White House event celebrating Joey Logano, the NASCAR Cup Series Champion, Trump claimed his method for assigning and adjusting tariffs was based on “more of an instinct than anything else”.
“You have to be flexible,” he said. Trump acknowledged that some investors had been “queasy” about the economic turbulence prompted by his tariffs.
“I thought that people were jumping a little bit out of line, they were getting yippy, you know.” But he emphasised a positive outlook towards the financial markets.
“They [stock prices] change.” He said that markets had rallied to “the biggest day in financial history” after his latest tariff adjustment. “That’s a pretty big change.”
He added that countries were now lining up to do business with his administration.
“We have many other countries, as you know – many more than 75 – and they all want to come.” He also predicted the US would reap dividends before the end of the year.
“I did a 90-day pause for the people who didn’t retaliate because I told them, ‘If you retaliate, we’re going to double it.’ And that’s what I did with China, because they did retaliate.”
He re-emphasised that his punitive tariff campaign against China would push Beijing to the bargaining table.
“A deal could be made with every one of them. A deal’s going to be made with China. A deal’s going to be made with every one of them. And they’ll be fair deals. I just want fair,” Trump said.
“They weren’t fair to the United States. They were sucking us dry. And you can’t do that.”
What is the state of US-China trade relations?
Despite growing tensions between the US and China, Washington and Beijing remain major trade partners.
According to data from the Office of the United States Trade Representative, the total goods trade between the US and China stood at an estimated $582.4bn in 2024. US goods exports to China totalled $143.5bn. On the other hand, US goods imports from China totalled $438.9bn. The upshot is that America’s trade deficit with China was $295.4bn last year, marking a 5.8 percent rise ($16.3bn) over 2023.
China is the US’s third-largest trade partner, after Mexico and Canada. But the US has been slowly weaning itself off Chinese imports.
Chinese goods accounted for 13.3 percent of US imports in 2024, down from a peak of 21.6 percent in 2017.
Still, from washing machines and TV sets to clothing, China is one of the top suppliers of goods to the US.
The US Department of Commerce calculated that mechanical appliances (mainly low to mid-range technology products) made up 46.4 percent of all US imports from China in 2022.
On the flipside, $24.7bn of agricultural products were exported from the US to China in 2024 – mainly in the form of soya beans.
China is also a large importer of US farming equipment, computer chips and fossil fuels.
In what ways could the US benefit?
Trump has long maintained that tariffs can reduce America’s trade deficits and bring foreign manufacturing back to the US. He has also said they will pave the way for future tax cuts.
In 1979, nearly 20 million Americans made their living from manufacturing. Today, it’s closer to 12.5 million.
In the years following World War II, the US was a leading producer of motor vehicles, aircraft and steel.
“Since then,” says Vincent Vicard, head of international trade at the economic think tank CEPII, “foreign competition and productivity gains have shrunk the US relative share of manufacturing jobs”.
“And while it’s hard to say exactly what Trump wants,” Vicard told Al Jazeera, “part of the tariff plan is about raising revenue for income tax cuts and boosting industry.”
He pointed out that “some industries, like cars and steel, could benefit from lower foreign competition. However, they will also face higher prices for intermediate goods [used in their own manufacturing processes].”
Vicard said there may be “investment in several industries over the longer term… beyond five years. But the impact of tariffs on consumers in the near term will be higher prices.”
In what ways will tariffs hurt the US?
While Trump is hoping that his tariff regime will erode China’s trade surplus, Beijing benefits from entrenched competitive advantages.
According to Brian Coulton, a chief economist at Fitch Ratings agency, China’s industrial dominance won’t be easy to dislodge.
“In recent decades, China has built up an amazing logistics and infrastructure network [around its key manufacturing sectors],” he said. “They’re amazingly productive.”
He also pointed out that the “wage cost per manufacturing hour in the US is around $30, whereas in China it’s around $12”. Labour costs, in other words, are much lower.
Coulton told Al Jazeera that US “electronics and digital” firms are particularly exposed to Trump’s latest round of China tariffs. “Apple, for instance, is at high risk.”
He said “these are industries which import intermediate goods from China. So, the question is, whether they’ll absorb higher costs via lower profit margins or pass them on to consumers.”
For Coulton, it is likely to be a combination of both. “That means a squeeze on business activity and higher household costs.”
He expects US inflation will climb to above 4 percent this year, from 2.8 currently, and for gross domestic product (GDP) growth to slow.
During Trump’s first trade war with China in 2018, the US-China Business Council estimated that 245,000 US jobs were lost. As the scope of tariffs is greater today, it’s fair to assume that even more jobs will be shed.
“Trump’s tariffs are dramatic … they’ll be a shock to the US economy,” said Coulton.
