US Pauses Higher Tariffs for Most Countries but Hits China Harder

In a significant shift in global trade policy, former President Donald Trump announced a 90-day pause on newly imposed higher tariffs for most countries, softening the blow for many US trading partners. However, this pause does not extend to China, which has instead faced a sharp escalation. Tariffs on Chinese goods have surged to a massive 125%, marking a dramatic escalation in the US-China trade war. The move reflects Trump’s renewed push to reset global trade dynamics, particularly targeting what he views as China’s unfair dominance and retaliatory trade measures.

Key Points

The 90-Day Tariff Pause

• Trump paused higher tariffs for countries that did not retaliate against US tariffs.
• These countries will now be subject to a “lowered reciprocal tariff” of 10%.
• Countries like the EU, Vietnam, and South Africa were spared the steep tariffs they were initially assigned.
• Trump emphasized the pause was “because people were getting yippy.”

China Faces Escalated Tariffs

• Tariffs on Chinese imports were raised to 125%.
• China had already imposed 84% tariffs on US imports in response to earlier moves.
• Trump cited China’s “lack of respect” and promised further action unless China changes course.
• US shares surged following the announcement, indicating market relief.

Background to the Conflict

• Trump had earlier set a baseline tariff of 10% on all imports into the US.
• Higher tariffs (11% to over 100%) were to be imposed on “worst offender” nations.
• This sparked global market panic, leading to trillions in losses and recession fears.

Impact on Markets

• US debt interest spiked to 4.5%, highest since February.
• After the 90-day pause announcement, the S&P 500 rose 9.5%, and Dow Jones climbed 7.8%.

China’s Position

• China’s Foreign Ministry accused the US of “bullying practices.”
• Warned that the US must demonstrate “mutual respect and reciprocity.”
• WTO predicted up to 80% drop in bilateral trade, amounting to a $466 billion decline.

Trump’s Long-Standing Views

• The tariff hikes reflect Trump’s anti-China stance dating back to his 2016 campaign.
• He criticizes China’s Made in China 2025 plan, accusing it of industrial dominance.
• Trump seeks to dismantle the idea of China as the “factory of the world.”

Other Affected Policies

• 25% import taxes on cars, car parts, and steel/aluminium remain in place.
• The EU, despite being a “worst offender,” was capped at 10% due to delayed retaliation.
• Canada and Mexico are exempt from even the 10% baseline tariff.

Global Reactions

• UK not impacted, as it was already on the 10% list.
• A UK government spokesperson said, “A trade war is in nobody’s interest.”
• WTO and economists warn of long-term global trade disruptions.