Trump Pauses Tariffs, But China Still in the Hot Seat

In a dramatic policy reversal, U.S. President Donald Trump paused the sweeping tariffs he imposed just a day earlier, igniting a global stock market rally despite escalating tensions with China. The sudden decision followed sharp market volatility not seen since the early days of the COVID-19 pandemic, which wiped out trillions in value and sent U.S. bond yields soaring — a move that reportedly caught Trump’s attention.

Following the announcement, the S&P 500 surged 9.5%, Japan’s Nikkei climbed 8%, and European markets looked poised for similar gains. However, signs of investor skepticism emerged as U.S. futures began trending downward, raising concerns about the rally’s longevity.

Despite the market relief, fears of a looming recession persist. The recent turmoil highlighted investor unease about the administration’s unpredictable trade tactics. Treasury Secretary Scott Bessent claimed the tariff pullback was a strategic move to encourage negotiations. Still, Trump later admitted the market panic played a role in his decision, emphasizing the need for “flexibility.”

Trump maintained a hardline stance on China, however, escalating tariffs on Chinese goods from 104% to 125% immediately after the pause on other trading partners. The move triggered alarm among Chinese exporters, particularly those selling on platforms like Amazon, with many now considering price hikes or an exit from the U.S. market.

Beijing responded with retaliatory tariffs of 84% on U.S. goods and reaffirmed its commitment to “fight to the end.” Experts warn the escalating tit-for-tat could deepen economic uncertainty. “The U.S. and China are currently in a powerplay game of brinkmanship,” said ING’s Chris Turner.

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While markets saw a temporary lift, the unresolved trade conflict and policy unpredictability leave the global economy on shaky ground.