Trump’s latest shock 145% tariff on China, amid a pause for others, reignited trade tensions and drew swift retaliation. Despite brief market gains, analysts warn the damage to global trade and investor confidence may already be irreversible.
U.S. President Donald Trump’s decision to implement a 90-day pause on tariffs for most countries, while maintaining a steep 125% levy on China, has triggered a wave of market reactions and expert analysis.
The move, intended to alleviate trade-induced volatility, has sparked a modest rally in global equities, but lingering uncertainties and the continued targeting of China have tempered overall optimism.
On Monday, US stock markets rose as the White House indicated some electronics would be exempt from tariffs. The Dow and S&P 500 both gained around 0.8%, while the Nasdaq rose 0.6%. While the market on Tuesday saw a more mixed day, with initial gains moderating.
The S&P 500 and Dow Jones again saw modest increases (around 0.8%), while the Nasdaq’s rise was more muted (around 0.6%), reflecting cautious optimism.
Europe’s STOXX 600 surged, led by tech, with strong performances across the DAX, CAC 40, and FTSE 100. Asian markets followed suit—Japan’s Nikkei rose 0.9% and South Korea’s Kospi 0.8%—while Chinese indexes lagged amid doubts over the scope and durability of the tariff relief.
The tariff pause comes on the heels of a series of erratic trade announcements that have roiled markets and spooked investors worldwide.
As part of his national security strategy, Trump had previously imposed sweeping 10% tariffs on a range of imports starting April 5, with threats of more to follow.
However, growing market volatility and pushback from key sectors appear to have prompted a reassessment. “There have been very mixed messages on whether there would be negotiations,” observed John Canavan, lead analyst at Oxford Economics. “Given what’s been going on with the markets, he realized the safest thing to do is negotiate and put things on pause.”
“Trump granted exemptions on electronic tariffs and signalled an auto tariff relief, both of which are seen as setbacks from the previously announced import levies, hence, providing some relief to risk assets, including oil,” says independent market analyst Tina Teng. “However, the rally in stocks and growth-sentiment commodities is sceptical, as his policy is unpredictable.”
Yet the pause excludes China, which now faces a staggering 145% tariff on many of its exports to the U.S.—a dramatic escalation in what has become a tit-for-tat trade war between the world’s two largest economies.
Beijing responded swiftly, slapping retaliatory tariffs of up to 125% on American imports. Chinese President Xi Jinping denounced the U.S. stance as “economic bullying,” while a spokesperson from China’s Finance Ministry remarked that Washington’s repeated tariff hikes “will become a joke in the history of the world economy.”
The Chinese foreign ministry’s Lin Jian offered a diplomatic yet firm response, stating that Beijing would continue “shaking hands rather than shaking fists” and “connecting instead of decoupling,” signalling willingness to negotiate but not surrender.
Still, the consequences of these policies are being deeply felt. Carl Tannenbaum, chief economist at Northern Trust, warned, “Damage to consumer, business, and market confidence may already be irreversible.”
This concern echoes across global financial institutions, which fear long-lasting impacts on international trade, business sentiment, and investment. The World Trade Organization has projected that continued escalation could shrink U.S.-China trade by as much as 80%, with global repercussions.
Meanwhile, China’s trade data for March showed a 12.4% year-on-year surge in exports—a five-month high—as exporters rushed shipments ahead of the new U.S. tariffs implemented on April 2.
Imports into China fell by 4.3%, highlighting the imbalance caused by disrupted supply chains. A professor at Hong Kong University, speaking to the Associated Press, noted, “If high tariff is sustained for the next six months or longer, that would actually lead to a real effective decoupling between the American and Chinese economies,” underscoring the potential permanence of this rift.
Imported semiconductors and medicines, were initially spared, but on Sunday, the Trump administration announced that a new tariff rate for semiconductors would be revealed within the week.
The U.S. remains heavily reliant on Taiwan for chips and on India and China for pharmaceuticals. While Trump aims to bring manufacturing back to American soil, drug companies have warned that such tariffs could lead to shortages and reduced access to life-saving medicines.
In parallel, Trump floated the possibility of temporary exemptions for automakers from the recently announced 25% tariff on imported vehicles and auto parts. This development spurred a surge in shares of major U.S. carmakers such as Ford, GM, and Stellantis. Trump justified the potential carve-outs by saying automakers “need time” to shift production from places like Mexico and Canada to the U.S.—a process that could take years.
On the international stage, reactions have been strong and varied. European Commission President Ursula von der Leyen warned that the EU is prepared to act if Washington does not offer a “satisfactory” outcome in trade talks. “Our countermeasures will kick in,” she stated, highlighting growing frustration among America’s long-time allies.
Meanwhile, the African Development Bank and the Economic Commission for Latin America and the Caribbean (ECLAC) have both reiterated the risks trade disruptions pose to developing economies, which rely heavily on stable exports.
Elsewhere, China has begun cutting off exports of rare-earth minerals and magnets, critical components in electric vehicles, electronics, and defence systems. Although these materials are not scarce, China dominates global processing capacity.
Investor and Trump supporter Bill Ackman added his voice to the fray, publicly urging a 90-day delay in Chinese tariffs. Praising Trump’s recent flexibility, Ackman argued the pause “would give U.S. businesses time to adjust and give China a chance to negotiate in good faith.” Yet not all are convinced.
Economic projections remain bleak. Forecasts for U.S. GDP growth in 2025 have been downgraded from 1.7% to just 0.8%, with some analysts predicting even slower growth this year. A possible recession looms, with recession odds hovering at 45%, according to leading economists.
The tariff standoff continues to cloud global trade and economic confidence. Whether the pause leads to real negotiations or just delays further escalation remains uncertain.
