Donald Trump surprised financial markets on Wednesday with a sudden shift in trade policy, revealing his intention to implement a 90-day suspension of reciprocal tariffs for all countries except China, explaining that the decision was prompted by growing concerns among the public.
“People were becoming a bit yippy, a little anxious,” he commented, alluding to the instability in the markets that arose after his recent “Liberation Day” tariff declaration.
The key S&P 500 (^GSPC) surged more than 9.5%, marking the largest gain since 2008.
Trump mentioned that the decision solidified early Wednesday morning after days of contemplation.
“We decided to take action today, and we feel good about it,” he remarked. “If things continued on this path, we would end up back where we were a month ago,” he noted.
The market’s remarkable uptick followed Trump’s announcement of a suspension on many tariffs, while maintaining a 10% baseline duty that took effect over the weekend for all countries.
This baseline duty does not apply to Mexico or Canada, which are still subject to specific duties concerning fentanyl. Additional industry-specific tariffs on steel, aluminum, and automobiles also remain unchanged.
Read more: The latest news and updates on Trump’s tariffs
The president’s pause on the “reciprocal” tariffs notably excludes China, with Trump announcing plans to unilaterally increase tariffs on China to 125% due to what he termed “a lack of respect from China.”
In the afternoon, Trump suggested that he might consider granting exemptions to some U.S. companies from the tariffs, indicating that such decisions would be made “instinctively.”
President Donald Trump addresses reporters alongside Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in the Oval Office on April 9. (Anna Moneymaker/Getty Images)·Anna Moneymaker via Getty Images
This latest move further exemplifies the confusion in Trump’s evolving tariff strategy, coming shortly after Treasury Secretary Scott Bessent stated that the president’s choice had nothing to do with the recent turmoil in the stock and bond markets, asserting that “this has been his strategy from the outset.”
When confronted about the apparent inconsistency and the advisors who previously stated this wasn’t a negotiation, Trump responded, “sometimes it’s not a negotiation until it actually is.”
Over 75 countries have approached the U.S. to initiate discussions regarding the reciprocal tariffs, with Trump’s administration indicating that the 90-day pause will facilitate a “customized” solution for each.
However, Trump appeared to recognize that market dynamics influenced his decision to announce the pause, sharing that he noticed last night in the bond market that “people were becoming a bit queasy,” adding, “you have to be adaptable.”
Treasury Secretary Scott Bessent speaks with reporters outside the West Wing of the White House on Wednesday. (AP Photo/Jacquelyn Martin)·ASSOCIATED PRESS
This action also increases pressure on China as the U.S. government seems to aim at isolating the second-largest economy by initiating dialogues with its neighboring countries while continuing to escalate tariffs imposed on China itself.
Read more: What Trump’s tariffs mean for the economy and your wallet
“China is the most unbalanced economy ever,” Bessent remarked to reporters on Wednesday, branding it the “largest source” of U.S. trade issues.
Wednesday’s announcement will also reduce duties on the European Union from 20% to the new 10% baseline implemented on April 5. This reduction comes even as the EU approved its own retaliatory tariffs earlier that day, but Trump stated that the EU would receive a reprieve because those tariffs hadn’t been enacted yet.
“These countries have, at my strong recommendation, not retaliated against the United States in any way. I have authorized a 90-day PAUSE and significantly lowered the Reciprocal Tariff during this period to 10%, effective immediately,” Trump stated in his initial announcement.
Terry Haines from Pangaea Policy mentioned shortly after the news broke that another factor potentially uplifting the markets was that “Bessent is the principal advisor while [Commerce Secretary Howard] Lutnick handles the negotiation details, which is likely reassuring to the market.”
This represents a partial reversal of what economic analysts had warned could affect household finances, with a new study from the Yale Budget Lab released Tuesday estimating that tariffs could raise prices by 2.3%, resulting in an additional average cost of $3,800 for families this year.
Globally, 185 countries have been affected by the 10% duties instituted last weekend, and those duties are expected to persist.
Trump and his team have consistently highlighted the significant number of countries expressing interest in negotiations, with Bessent stating they are currently “overwhelmed.”
Japan, South Korea, and Vietnam are reportedly at the forefront of discussions commencing this week. Further negotiations may take weeks or months, with no clear timeline on whether they will be completed before the 90-day pause concludes in July.
Regarding the uncertain future of the still-anxious markets, Bessent remarked on Wednesday, “the only certainty we can offer is that the U.S. intends to negotiate in good faith.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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