US President Donald Trump has announced a pause on the implementation of most of his reciprocal tariffs. He explained the decision by saying that people were “getting yippy and a little bit afraid.”
The pause lowers tariffs to 10 per cent and applies to imports from all trading partner countries that have not imposed retaliatory levies on American goods. This includes over 75 countries that have opted to negotiate with the administration, such as India, which is currently in talks with the US over a Bilateral Trade Agreement.
However, China stands out as a major exception to this sudden shift. In response to China’s retaliatory levy of 84 per cent on American goods, Trump has increased tariffs on Chinese imports to a staggering 125 per cent. The announcement, made via a post on Truth Social, rattled already-volatile markets. Yet, in a dramatic turnaround, markets surged shortly afterward, with the tech-heavy Nasdaq soaring to a two-decade high.
Trump’s decision to halt most tariffs reportedly caught even his own officials off guard. When asked about the abrupt policy reversal, Trump repeated that people were getting “yippie and a little bit afraid,” adding, “You have to be flexible,” when pressed further.
Trump’s Tariff Reversal and Market Reactions
Despite early declarations from top aides that the levies were non-negotiable, Trump had signaled a willingness to negotiate when first introducing the tariffs. He moved ahead with the pause on Wednesday morning.
Since the reciprocal tariffs went into effect, US markets have been in turmoil. Calls for a 90-day pause have come from key Wall Street voices, including Bill Ackman. Trump has also encountered pushback from key advisor Elon Musk, who criticized the tariffs and engaged in a public spat with Peter Navarro, one of the President’s main trade advisors.
Following the announcement, Asian markets rebounded significantly. Japan’s Nikkei share average surged as investors scooped up battered stocks, echoing gains on Wall Street, where the S&P 500 jumped 9.5%—its biggest daily gain since 2008. Analysts at Morgan Stanley described Trump’s move as bullish for Asian equities, and especially so for Japanese stocks.
EU, China in Talks
Meanwhile, the European Union has called for restraint. Commission President Ursula von der Leyen emphasized the importance of avoiding further escalation in a phone call with Chinese Premier Li Qiang. In response, China expressed confidence in its ability to weather the economic pressure.
In India, markets unsettled by recent tariff news may find relief in the pause. The decision also gives New Delhi a window to finalize its deal with the US and prepare for any future tariff actions. India has not retaliated against Trump’s 26 per cent levy and has remained engaged in negotiations, as have nearly 70 other nations.
The tariff pause has also prompted Goldman Sachs Group economists to retract a recent recession forecast. Initially projecting a 65% chance of a recession within 12 months due to the tariffs, they have since reverted to their earlier baseline prediction of no recession following Trump’s announcement.