President Trump’s abrupt 90-day pause on newly announced tariffs—excluding China—temporarily calmed global markets, triggered a 9% surge in the S&P 500, and exposed the mounting internal and external pressures undermining his hardline trade agenda.
A Sudden Reversal in Tariff Policy
Just a few hours after the Trump administration’s new sweeping tariffs on all the US trade partners, President Trump announced a 90-day pause on these tariffs for all the countries, except China. This move calmed international unrest, fueled investor optimism, and offered a narrow opportunity for diplomatic negotiations. Behind this sudden policy reversal, an intricate interplay of economic facts, global trade relations, and political pressure was at play. The US President had no other option than to take back down from the fundamental premise of his zealous trade ideology.
President Trump announced the decision in his social media post on Trump Social. Although this pause exempted some areas like steel, aluminum, and cars, the suspension of new tariffs on a wide range of goods caused the S&P 500 to increase by 9 percent in merely a single day, an unprecedented surge in over a decade. Different sectors saw a rapid boost after Trump’s policy reversal.
Trump stated that his decision was based on his instinct, frightening the citizens and markets alike. His statement illustrates portends that the key driver behind this reversal was the plummeting US markets and decreasing investor confidence in the Trump administration’s economic policies. A host of other powerful forces also played a decisive role in prompting President Trump’s policy reversal. The US bond market panicked soon after Trump announced new tariffs on all the trade partners, signaling imminent recession. The US dollar also lost ground, further stoking fear. The US citizens protested against this erratic economic policy of the Trump administration, as they saw this economic policy as unjust and reckless which could lead to inflation, unemployment, and impinge the country’s international reputation.
Retaliation, Recession, and Rising Tensions
Trump’s tariff policy plunged the country into a trade war with several countries, especially China. Economists and industry experts cautioned that a trade war would drive up production costs, particularly for goods reliant on imported components and raw materials. American manufacturers also maintained that they could not increase the supply chains instantly. Even Trump’s allies raised their concerns and discontent over his economic strategy.
President Trump’s exemption of China in this temporary tariff suspension also implies profound geopolitical antagonism between the two global economic giants. Both countries imposed retaliatory tariffs on each other, leading to 125 percent levies on Chinese products and 84 percent taxes on US goods. These retaliatory measures have further strained relations, which are already tense due to allegations of economic spying, between Beijing and Washington.
In a retaliatory move, the Chinese Ministry of Commerce placed export restrictions on 12 US companies and declared 6 American companies as disloyal entities, significantly banning their access to the Chinese markets. However, the Trump administration asserts that their tariff policy is effective, referring to the economic concessions gained from several third-world countries. They have shown their willingness to open and ease their import policies for US goods.
The Need for a Long-Term Economic Strategy
However, economists and business leaders are still debating the effectiveness of the US tariffs in restoring US industrial dominance. Although the Trump administration seeks to stimulate domestic production, numerous challenges persist, including quality, innovation, efficiency, and customer support services – which prompt American citizens to buy exported goods. Therefore, the US government needs to tailor a long-term policy to improve the competitiveness of domestic products. It also needs to invest in research and development, green technologies, and automation. Otherwise, the incumbent protectionist policies will only impinge the US interests in the long run.
Trump’s imposition of tariffs on all the trade partner has destabilized the global markets. The retaliatory tariffs on the US products will decrease the demand for the US products, weakening the dollar. Russia, China, and other BRICS nations are already pursuing the world to use local currencies for trade. BRICS countries are also planning to launch their own currency. The United States’ new tariffs will only strengthen the prospects of de-dollarization.
Moreover, the Trump administration is tarnishing the already declined international stature of the United States. No country in the world now views Washington as a reliable ally. The temporary suspension of these tariffs illustrates that the Trump administration is making amateur decisions, jeopardizing the interests of the country. Just as President Trump has re-evaluated his tariff policy, he needs to revisit his administration’s economic policy. The administration must use this pause as an opportunity to reorient its priorities. It can use this pause to foster the country’s diplomatic and economic relations and reinvest in the domestic industry. However, whether this pause results in a sustainable economic strategy or not remains a question.
Taut Bataut – is a researcher and writer that publishes on South Asian geopolitics
