President Donald Trump on Wednesday raised tariffs on imports from China to 125 percent while simultaneously pausing many new tariffs on goods from other nations, sending the stock market surging.
Trump’s midday post on Truth Social said the higher China tariff would take place immediately. He also said more than 75 other countries that were set to face what the White House has called “reciprocal tariffs” have been involved in negotiations and would see their levies paused or lowered to 10 percent for 90 days, also effective immediately.
The major stock indexes climbed rapidly in the early afternoon, after they’d mostly slid since Trump first announced his new tariff policies a week ago. The widely followed S&P 500 gained more than 6 percent, and the narrower Dow Jones Industrial Average rose 5 percent. The tech-heavy Nasdaq composite index popped 8 percent.
China had raised tariffs on U.S. imports to 84 percent overnight, retaliating for U.S. tariffs on Chinese goods that kicked in at midnight. Trump’s announcement raised the U.S. rate from an already high 104 percent.
The significant shift came after the 10-year U.S. Treasury bond sold off heavily earlier in the morning. Those bonds are typically seen as a safe haven when markets are unsettled and rose sharply to more than 4.5 percent before retreating somewhat. Yields move inversely to prices, meaning investors are quickly selling U.S. bonds.
Treasury Secretary Scott Bessent told reporters after the president’s announcement that Trump would be personally involved in negotiating trade deals with individual countries, which would be “bespoke” and tailored for each nation. Bessent said Trump had created “maximum negotiating leverage” and praised the president’s willingness to face major economic pressure to force other countries to reach a deal. The remarks came after Bessent had tried earlier in the day to tamp down fears about the bond market.
“This was his strategy all along,” Bessent said, adding, “You might even say he goaded China into a bad position – they have shown themselves to the world to be the bad actors.”
Bessent said sector-specific tariffs being considered by the White House, on industries such as pharmaceutical and lumber imports, would not be affected by the pause announced by Trump on Wednesday. He said the administration would be meeting with Vietnam on Wednesday and had also been in discussions with Japanese officials.
“No one creates leverage for himself like President Trump,” Bessent said. “We’ve been overwhelmed – overwhelmed – by the response, mostly by our allies, who want to come and negotiate in good faith.”
Commerce Secretary Howard Lutnick said on social media that he and Bessent were sitting with Trump while he wrote the Truth Social post announcing the delay. Lutnick called it “one of the most extraordinary Truth posts of his Presidency.”
Before Trump’s announcement, the bond market’s woes had raised fears that the United States may be in the early stages of financial turmoil that could prove difficult for the Federal Reserve or other agencies to resolve. Typically, investors flee to Treasurys during market panics because the U.S. government is viewed as among the safest investments in the world. But the rise in yields this time appears to scramble that story, suggesting at least some drop in confidence in the Treasury Department’s ability to repay its obligations.
The U.S. government relies on cheap borrowing rates to run massive annual deficits, which enable high levels of spending and low taxation. Higher bond rates could make it far more expensive to finance federal debt, forcing major tax hikes or cuts to spending. Lending throughout the economy is also tied to U.S. Treasury rates. That means the costs of loans for mortgages, cars and other goods could go up – even as the nation overall faces an economic slowdown.
“For a country with our scale of deficits and debt, aversion to our government debt is a potentially grave thing. This kind of pattern is quite normal for emerging markets – not for superpowers,” said Larry Summers, who served as treasury secretary during the Clinton administration. “We should be very concerned.”
Although markets surged on the news, the pause could compromise the president’s other trade promises. The White House had said the tariffs could raise more than $6 trillion in new revenue to fund tax cuts and other priorities – an impossibility with most of the import duties being paused or rolled back.
Before the policy change, experts said the administration was courting disaster in a cornerstone of the U.S. economy if it did not reverse course. Some experts have even expressed concern the U.S. is heading toward a replay of the 2022 financial crisis in the United Kingdom, triggered by then-prime minister Liz Truss, in which a loss of faith led to a collapsing value of the British pound and Truss’s rapid resignation.
Canada’s tariffs of 25 percent on U.S. autos took effect Wednesday, matching U.S. tariffs on autos and auto parts. The European Union issued tariffs of its own with 25 percent duties on some U.S. products. European markets sold off overnight, with London’s FTSE 100 France’s CAC index and Germany’s DAX each down roughly 3 percent.
Some U.S. companies Wednesday had started warning of a cloudy economic picture. Walmart on Wednesday cited tariff risks as a reason for backing away from its previous target for first-quarter profit growth. Delta Air Lines pulled its earnings forecast for the year because of “broad economic uncertainty around global trade.”
In Asia, Japan’s Nikkei 225 lost 4 percent, while South Korea’s KOSPI ended the day roughly 2 percent lower.
Hong Kong’s Hang Seng Index, which lists many Chinese exporters, fell sharply as trading opened there Wednesday but recovered to eke out a modest gain of 0.7 percent.
Oil prices tend to fall when markets anticipate lower economic activity. The West Texas intermediate crude index was down earlier in the day but rallied after Trump’s announcement.
Pharmaceutical giants were the latest to be swept up in the market rout after Trump hinted at impending tariffs on imported pharmaceuticals. European pharmaceutical companies sold off, with companies such as AstraZeneca and Roche in the red.
U.S. pharmaceutical companies could see disruption from the tariffs, too, as many of them have moved manufacturing and intellectual property overseas in recent years, which some experts have described as a bid to lower their corporate taxes. Tariffs on European imports, for example, could disrupt that strategy.
U.S. companies Pfizer, Johnson & Johnson and Merck were each down earlier Wednesday but flashed green in the afternoon.
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