After days of panic on financial markets, Donald Trump abruptly backed down on much of his tariff plan on Wednesday by announcing a 90-day pause for dozens of countries – but he escalated his tit-for-tat trade war with China by imposing additional duties of 125%.
The president said he pulled back on tariffs for more than 75 nations because people “were getting a little bit yippy, a little bit afraid.”
It came barely 48 hours after a White House spokesman dismissed reports of a 90-day pause as “fake news” and followed intense political pressure from fellow Republicans and some of the president’s own billionaire backers.
And it came only 12 hours after Mr Trump boasted at a fundraising dinner: “These countries are calling us up, kissing my a**” to negotiate deals.”
The US Treasury said a blanket 10% levy on all imports to the US will remain in place, meaning Britain’s position is effectively unchanged – although the hiatus does give Sir Keir Starmer’s government more breathing space to negotiate a trade deal with Washington.
Downing Street said on Wednesday night that Britain will continue talks: “We don’t want any tariffs at all, so for jobs and livelihoods across the UK, we will coolly and calmly continue to negotiate in Britain’s interests.”
A government source said the 90-day pause vindicated the prime minister’s decision not to retaliate immediately on imports. “Cool and calm can pay off,” the source said. “It’s how the PM does business and it’s the right approach.”
US stock markets recovered dramatically after Mr Trump’s announcement, in which he said he suspended tariffs to allow time for officials to negotiate with countries that have sought to reduce them.
But he kept the pressure on China – the second-largest exporter to the United States – by raising tariffs on Chinese imports to 125% from the 104% level that took effect at midnight. The two countries have traded tit-for-tat tariff hikes repeatedly over the past week, and a trade war between two major economies still puts the world at risk of an economic slowdown.
Trump’s press secretary Karoline Leavitt and Treasury Secretary Scott Bessent sought to downplay talk of Trump reversing course or backing down by characterizing his abrupt about-face as part of a savvy negotiating strategy rather than a reaction to criticism or panic over the tumbling stock markets.
“We have had more than 75 countries from around the world reach out to President Trump and his team here at the White House to negotiate better trade deals for the American worker. We have been overwhelmed with the amount of requests for countries around the world,” said Leavitt, added that the increased tax on Chinese imports were a punitive measure “because China imprudently decided to retaliate against the United States.”
He said the exorbitant taxes on Chinese goods were justified because China is “the most imbalanced economy the history of the modern world” and “the biggest source of the US trade problems.”
Bessent told reporters that lower 10 percent tariffs would also apply to imports from Mexico and Canada, marking another reversal.
Hours earlier, London’s FTSE 100 share index closed at a fresh 13-month low after European markets dropped further. Meanwhile, yields on long-dated government bonds surged to their highest point since 1998 as investors anticipated faster interest rate cuts from the Bank of England to avoid inflation.
Ministers still hope an economic agreement with Washington can be reached to soften the blow of some of Mr Trump’s tariffs, which also include a 25% charge on cars and others on steel and aluminium.
They are also seeking closer trade ties with other countries.
Sir Keir spoke to Saudi Crown Prince Mohammed bin Salman on Wednesday afternoon about “strengthening economic partnerships” and agreed to build on progress made so far on the UK-GCC Free Trade Agreement.
Meanwhile, chancellor Rachel Reeves signed a statement for around £400 million of deals with India on Wednesday as part of talks aimed at securing a deal with New Delhi.
She also said a UK-EU summit on May 19 would be a chance “to refresh our relationship and make it easier for businesses to trade”.
Discussion of a deal with the US has raised concerns about what concessions the Government might make in order to secure an agreement.
Earlier in the week, the Prime Minister told MPs he would be “very protective” of the NHS and was “very clear” that a digital tax on big tech firms should remain in place.
In a Truth Social post, Mr Trump claimed that his tariff reversal was a result of what White House officials have claimed are dozens of foreign nations reaching out with the intention of re-negotiating trade policy with the United States, rather than implementing tariffs of their own.
He then told reporters his decision was made in response to days of market panic and rippling effects across various economic sectors.
“I thought that people were jumping a little bit out of line. They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid,” he said at a White House event with NASCAR drivers. “I’ve reversed it. It’s for a short period of time.”
At the National Republican Congressional Committee’s annual fundraising gala on Tuesday night, Mr Trump had hailed the policies he was imposing as a harbinger of an American manufacturing renaissance that would keep his Republican Party in power after next year’s midterm elections during a black tie gala with deep-pocketed GOP donors and House members who will be up for re-election in 2026.
He told attendees at that the stage is now “set for a monumental victory for the Republicans in the midterms” on account of his policies, which most mainstream economists and business experts say will supercharge inflation and threaten America’s status as the world’s leading economy with a grievous self-inflicted wound.
“I really think we’re helped a lot by the tariffs situation. It’s great,” he said.
