Trump's Tariff U-Turn: A 90-Day Pause For Most Countries, But China Faces Higher Levies
In a shocking reversal, US President Donald Trump announced a 90-day pause on higher tariffs for most countries, but simultaneously slapped even more stringent levies on China. This move has sparked a global trade war, with the world's two largest economies locked in a bitter confrontation.
The 90-day pause, which took effect immediately, will see tariffs reduced to a flat rate of 10% on all countries that had reached out to negotiate with the US and refrained from retaliating. However, China faces a starkly different scenario, with tariffs skyrocketing to a staggering 125%. This dramatic escalation comes after Trump accused China of "ripping off" the US, claiming that Beijing had shown a lack of respect for global markets ¹.
The sudden shift in US trade policy sent shockwaves through global markets, with Wall Street stocks experiencing a rollercoaster ride. Initially, the S&P 500 plummeted in response to the tariffs, but Trump's pause announcement sparked a 6% surge, snapping a brutal run of losses over the past week. European and Asian stock markets also felt the impact, with oil prices and the dollar experiencing significant fluctuations.
The European Union, which Trump has accused of being created to "screw" the US, launched its own counterattack in response to American duties on global steel and aluminum exports. The 27-nation bloc will impose tariffs on over $20 billion worth of US products, including soybeans, motorcycles, and beauty products. However, the EU notably refrained from retaliating against the 20% US tariffs that took effect simultaneously.
China swiftly responded to Trump's tariff hike, increasing its own levies on US imports to 84%. The Chinese finance ministry condemned the US move, stating that the tariff escalation "simply piles mistakes on top of mistakes." Beijing also warned tourists to "fully assess the risks" before traveling to the US, while US Defense Secretary Pete Hegseth cautioned against Chinese "threats" during a visit to Panama.
US Treasury Secretary Scott Bessent warned countries at a banking summit that aligning with Beijing would be "cutting your own throat." This statement underscores the US' determination to protect its economic interests and revive its manufacturing base by forcing companies to relocate to the US.
Trump believes his policy will revitalize America's lost manufacturing base by compelling companies to relocate to the US. He has particularly targeted China, accusing it of excess production and "dumping" inexpensive goods on other economies. However, critics argue that this approach may lead to unintended consequences, including higher prices for consumers and retaliatory measures from affected countries.
Conclusion
The ongoing trade war between the US and China has significant implications for the global economy. As the situation unfolds, it remains to be seen how countries will respond to Trump's tariff policies and whether the 90-day pause will provide a much-needed respite for global markets. One thing is certain, however: the stakes are high, and the world is watching with bated breath as this economic drama unfolds.
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