Trump Suspends Tariff Hikes for 90 Days, Slaps 125% Levy on China

In a surprising turn, U.S. President Donald Trump announced a 90-day suspension of heavy tariffs he had just imposed on dozens of countries on Tuesday. At the same time, he ramped up pressure on China by increasing tariffs to 125%.

Trump’s unexpected announcement came about 13 hours after higher tariffs on 56 countries and the European Union (EU) took effect, fueling market turmoil and fears of a recession. The president faced intense pressure from business leaders and investors to reverse course.

“I thought people were getting a little out of control,” Trump told reporters at the White House when asked about his reversal. “They were getting a bit nervous, a bit scared.”

He announced his decision on his Truth Social platform at 1:18 p.m. Tuesday, stating that over 75 countries had contacted his administration to negotiate trade barriers and had not retaliated “in any way.” “I have authorized a 90-DAY SUSPENSION and a substantially reduced RECIPROCAL TARIFF of 10% during this period, effective immediately,” Trump wrote.

Markets responded with euphoria, marking the biggest rally since 2008. The S&P 500 rose 9.5%, while the tech-heavy Nasdaq gained 12%. “We’re having a good day in the stock market, as you can see — a record day — and I hope it continues,” the president said later in the Oval Office.

Trump also said he would “review” tariff exemptions for certain U.S. companies, making decisions “by instinct.” “Some companies, through no fault of their own, operate in more affected sectors. You have to show some flexibility, and I can do that,” he added.

Goldman Sachs economists even reversed their U.S. recession forecast, though the bank’s analysts still expect a significant economic slowdown this year due to political uncertainty.

“Earlier today, before President Trump’s announcement, we had shifted to a base-case recession scenario in response to the country-specific tariffs that came into effect this morning,” the Goldman Sachs team, led by Jan Hatzius, said in a note. “We are now reverting to our previous no-recession forecast.”

Trump suspended the elevated tariffs under intense pressure from volatile financial markets, even as some administration officials insisted the pause was part of the plan.

As U.S. stock prices and Treasury bond yields fell, Americans saw their retirement savings shrink, and companies warned of slumping sales and increased pricing pressures.

The global economy appeared to be in open revolt against the tariffs, signaling that even the U.S. president was not immune to market forces. Trump acknowledged watching the bond market closely, saying people were “getting a little nervous” due to falling bond prices and interest rates reflecting investor distrust in the administration’s previous trade stance.

“The bond market is very complicated,” Trump said. “I was watching. But if you look now, it’s beautiful — the bond market now.”

He later said he had been contemplating the suspension recently during talks with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, with the final decision made early Tuesday morning.

Asked why White House advisers had insisted that tariffs were not a negotiating tool for weeks, Trump replied, “Many times, it’s not a negotiation — until it becomes a negotiation.”

According to a White House official, countries affected by the now-paused reciprocal tariffs will be taxed at a baseline 10% rate for 90 days, except for China.

The 10% rate is significantly lower than the previous 20% on EU goods, 24% on Japanese imports, and 25% on South Korean products. Still, it represents an increase from prior U.S. tariff levels. Canada and Mexico will continue to face tariffs of up to 25% due to a separate directive from Trump aimed at curbing fentanyl smuggling.

The official added that U.S. tariffs on steel, aluminum, and automobiles remain at 25%.

The official said imports from the EU are also subject to a 10% tariff, though the bloc has announced retaliatory measures on metal tariffs that have not yet been implemented.

Trump reiterated his plan to move ahead with new tariffs on sectors such as pharmaceuticals. “We’re going to tariff the pharmaceutical companies, and they’ll all want to return,” he said.

Investors and analysts are now pointing to China to see whether Beijing will respond with higher tariffs or indicate a willingness to negotiate. Trump said he does not believe further escalation will be necessary to push China to the table. “I don’t think we’ll need to do that again,” he stated.

Trump’s decision to further increase tariffs on Chinese goods came after Beijing announced plans to retaliate with an 84% tariff on U.S. products, set to take effect today.

Washington specifically targets China regarding its trade practices and confrontational approach to Trump’s policies.

“Based on China’s lack of respect for global markets, I am increasing the tariff charged by the United States of America on Chinese goods to 125%, effective immediately,” Trump declared on social media.

Later, Trump predicted that Chinese President Xi Jinping or his team would eventually sit down with the U.S. “We’ll get a call at some point and start negotiating,” Trump said. “It’ll be great for them. It’ll be great for us. It’ll be great for the world and humanity.”

However, analysts say Trump has left little room for a negotiated exit unless China capitulates — something seen as unthinkable for Xi. “Xi won’t be forced into making a call,” said Sun Yun, director of the China program at the Stimson Center in Washington. She noted that in recent history, China’s leaders have only called the U.S. uninvited once — after the 9/11 attacks. If unchecked, trade tensions could spill into other areas, she warned.

Craig Singleton, a China scholar at the Foundation for Defense of Democracies, also in Washington, agreed that a call from Beijing was “unlikely in this climate.” “Each side believes time is on its side, which raises the risk that neither will act to de-escalate until real damage is done,” he said. “This is no longer just about tariffs. It’s a test of resolve.”

Trump presents his broad tariffs as a powerful tool to revive U.S. industry and spur economic growth, promising new factories and jobs. But the abrupt policy shift raises questions about whether his goal remains — and how he plans to achieve it. Treasury Secretary Scott Bessent called the move a win for Trump, saying at a White House briefing that the president “created maximum leverage for himself” in negotiations with other nations. He said he would speak with officials from Vietnam, Japan, India, and South Korea in the coming days.

Source: Valor Econômico

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