In sudden change of course, Trump lowers tariffs for most countries, raises them for China

Trump's turnabout, which came less than 24 hours after steep new tariffs kicked in on most trading partners, followed the most intense episode of financial market volatility since the early days of the COVID-19 pandemic. The upheaval erased trillions of dollars from stock markets and led to an unsettling surge in U.S. government bond yields that appeared to catch Trump's attention.

"I saw last night that people were getting a little queasy," Trump told reporters following his announcement. "The bond market right now is beautiful."

Since returning to the White House in January, Trump has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute. The on-again, off-again approach has baffled world leaders and spooked business executives, who say the uncertainty has made it difficult to forecast market conditions.

In the latest twist, Trump said he would suspend targeted tariffs on other countries for three months to allow time for U.S. officials to negotiate with countries that have sought to reduce them.

But he kept the pressure on China, the No. 2 provider of U.S. imports. Trump said he would raise the tariff on Chinese imports to 125% from the 104% level that took effect at midnight, further escalating a high-stakes confrontation between the world's two largest economies. The two countries have traded tit-for-tat tariff hikes repeatedly over the past week.

Trump's reversal on the country-specific tariffs is not absolute. A 10% blanket duty on almost all U.S. imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.

U.S. stock indexes shot higher on the news, with the benchmark S&P 500 .SPX index closing 9.5% higher. Bond yields came off earlier highs and the dollar rebounded against safe-haven currencies.

Trump's tariffs had sparked a days-long selloff that erased trillions of dollars from global stocks and pressured U.S. Treasury bonds and the dollar, which form the backbone of the global financial system. Canada and Japan said they would step in to provide stability if needed - a task usually performed by the United States during times of economic crisis.

Analysts said the sudden spike in share prices might not undo all of the damage. Surveys have found slowing business investment and household spending due to worries about the impact of the tariffs, and a Reuters/Ipsos survey found that three out of four Americans expect prices to increase in the months ahead.

Goldman Sachs cut its probability of a recession back to 45% after Trump's move, down from 65%, saying the tariffs left in place were still likely to result in a 15% increase in the overall tariff rate.

U.S. Treasury Secretary Scott Bessent shrugged off questions about market turmoil and said the abrupt reversal rewarded countries that had heeded Trump's advice to refrain from retaliation. He suggested Trump had used the tariffs to create “maximum negotiating leverage for himself.”

"This was his strategy all along," Bessent told reporters. “And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor.”

Bessent is the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters. Trump has spoken with leaders of Japan and South Korea, and a delegation from Vietnam was due to meet with U.S. officials on Wednesday.

Bessent declined to say how long negotiations with the more than 75 countries that have reached out might take.