WASHINGTON — President Donald Trump backed down from his trade war against the rest of the world Wednesday, at least temporarily, after his April 2 “Liberation Day” announcement tanked financial markets across the globe.
Trump announced on his social media platform that he is reducing tariffs on all countries to 10% for 90 days, rather than the higher rates he had misleadingly described as “reciprocal” tariffs last week. However, he said, China’s exports to the U.S. would now see a 125% tariff.
The stock market rallied at the news, with the Dow Jones Industrial Average up 6% on the day shortly after 2 p.m. Eastern time. It remains 2,000 points below its standing on “Liberation Day,” when Trump announced his massive tariff plan last week.
Trump’s cave came with relatively little warning and mere hours after he, his press secretary and other members of his administration had insisted there would be no pause and no negotiation on tariffs many conservatives had come to tout as a necessary burst of short-term pain to bring manufacturing back to America.
Why the announcement came just hours after the higher tariffs took effect, rather than the day before or Monday, remains unclear, but economists speculated that the 10-year Treasury bond yield remaining high was indicating a deeper problem setting in.
“It was a puzzling development and one that doesn’t bode well,” said Douglas Holtz-Eakin, a conservative economist and former director of the Congressional Budget Office.
Trump soon confirmed that at a photo opportunity with race car winners. “The bond market is very tricky, I was watching it. But if you look at it now, it’s beautiful. The bond market right now is beautiful. But yeah, I saw last night where people were getting a little queasy,” he told reporters. “I thought that people were jumping a little bit out of line. They were getting yippy. They were getting a little bit yippy, a little bit afraid.”
While providing short-term relief to the markets, the decision to back down has provided little guidance to America’s financial and political future. The stated goals of Trump’s tariff strategy ― a revival of manufacturing, a supposed burst of federal government revenue and an effort to reach new deals ― remain contradictory, with few economists willing to endorse his strategies.
Holtz-Eakin pointed out that even with the rollback, the United States now has the highest tariffs of any industrialized nation ― a situation that most investors and business leaders would have been horrified over just weeks ago.
“I’m very confused by the jubilation at this,” he said. “We have yet to understand what this whole thing will accomplish.”
Despite this, Trump’s aides immediately spun the delay as proof of Trump’s genius and negotiating skills. “Many of you in the media clearly missed ‘The Art of the Deal,’” White House press secretary Karoline Leavitt insisted to reporters.
Treasure Secretary Scott Bessent, who had been meeting with Trump when he wrote his social media post, said it had all been by design. “No one creates leverage for himself like President Trump,” he said.
Trump posted his announcement on his own Truth Social platform at 1:18 p.m. Eastern time:
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable,” Trump posted Wednesday afternoon.
“Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!”
While Trump had sold the higher rates on dozens of other countries as merely charging the same import tax on a country’s imports as that country was charging American goods, in fact Trump’s rates appeared to be based on that nation’s balance of trade with the U.S.
Countries that exported more to the United States than they imported from American manufacturers were hit with higher tariffs than the 10% baseline for all imports.
That formula hit poor countries, whose citizens simply cannot afford to buy American goods, the hardest. Vietnam had faced a “reciprocal” tariff of 46%, for example. Lesotho — which Trump at one point said he never heard of — was hit with 50%.
All of those tariffs were to have taken effect at 12:01 a.m. Wednesday, and now will be postponed three months, according to Trump.
The high tariff rate on Chinese goods, nevertheless, could create sticker shock for Americans used to buying cheap household goods made there. A T-shirt that might have sold for $9.99 at Walmart, for example, will now likely be priced at more than $20.
Jamieson Greer, the administration’s U.S. trade representative, was testifying on Capitol Hill about why the tariffs were necessary when Trump made the announcement. He was put in the unfortunate position of having to defend the president’s abrupt reversal in real time.
“It looks like your boss just pulled the rug out from under you,” said Rep. Steven Horsford (D-Nev.), who pressed Greer on why he didn’t tell the panel in his opening remarks that Trump was planning to pause the tariffs – if Greer even knew about it himself.
“What are the details of the pause?” asked Horsford.
“My understanding is that because so many countries have decided not to retaliate, we’re going to have about 90 days,” replied Greer.
“Excuse me?” Horsford interjected. “China increased their tariffs on the United States, Trump blinked.”
They went back and forth, with Horsford becoming irate as Greer declined to give details on conversations he may have had with Trump on his trade strategy, or lack thereof.
“So the trade representative hasn’t spoken to the president of the United States about a global reordering of trade?” Horsford said, his voice rising.
“Yes, I have,” said Greer. “I’ve just been in a hearing with you.”
“Yet he announced it on a tweet?” said the Nevada Democrat, now shouting. “WTF? Who’s in charge?”
“WTF? Who’s in charge?”
- Rep. Steven Horsford (D-Nev.)
Still, Trump’s popularity with his base means he may have little difficulty convincing many Republican voters he has a method to his madness.
“It’s unfolded exactly the way it should. It’s a beautiful thing,” Peter Navarro, Trump’s top adviser on trade matters, said Wednesday afternoon on Fox Business. “You gotta trust in Trump. America trusts in Trump.” Navarro spent much of the past week insisting there was no room for negotiation.
Despite Navarro’s claim, the tariffs were deeply unpopular with the public. A poll from The Economist/YouGov released Wednesday morning found just 36% of the public approved of the tariffs, compared to 52% who opposed.
Democrats, for their own part, mocked the chaos of Trump’s whiplash approach.