Historic market rally as Trump pauses global tariffs while targeting China with 125% duties

_{This article was developed in collaboration between IG's editorial team and AI technology}

Overview

In a surprising turn of events, global markets experienced a substantial rally following President Donald Trump's announcement of a 90-day pause on tariffs for most countries, excluding China. This move has brought temporary relief to investors, but the focus remains on the escalating trade tensions with China.

Markets rally as Trump eases global tariff concerns

Global markets surged on Wednesday after President Donald Trump announced a 90-day pause on tariffs for most countries while specifically targeting China with elevated duties. The US 500 (S&P 500) jumped 5.6%, while the US Tech 100 (Nasdaq 100) soared by over 8% in one of the largest single-day gains in market history.

The dramatic market reaction came after Trump revealed on his Truth Social platform that he would apply a substantially lowered reciprocal tariff of 10% to most nations during a 90-day negotiation period. However, he simultaneously announced that tariffs on Chinese imports would increase to 125%, citing "the lack of respect that China has shown to the World's Markets."

Trump explained that more than 75 countries have contacted US representatives to negotiate solutions on trade barriers, tariffs and currency manipulation. He praised these nations for not retaliating against initial US tariff threats and suggested this cooperative approach influenced his decision to implement the pause.

News Corp. building in New York on Wednesday, 9 April 2025.

China singled out amid retaliatory measures

While most nations received a reprieve, China stands at the center of Trump's aggressive trade policy. The dramatic increase to 125% tariffs on Chinese imports represents an unprecedented escalation in economic tensions between the world's two largest economies.

The severe action came shortly after China had already announced its own retaliatory measures. Beijing raised duties on all US goods to 84%, up from the previously announced 34%, following earlier US tariff increases that had reached 104% on Chinese products.

World Trade Organization chief Ngozi Okonjo-Iweala warned that this escalating tariff war could reduce trade in goods between the US and China by up to 80%, potentially triggering widespread economic consequences globally.

Treasury Secretary Scott Bessent characterized the approach as strategic, suggesting Trump had deliberately "goaded China into a bad position" to justify stronger measures. "When you punch at the United States of America, President Trump is going to punch back harder," White House Press Secretary Karoline Leavitt added, framing the action as a response rather than an initiation.

Hang Seng Index

Negotiations ahead as Trump outlines trade approach

Despite the aggressive stance toward China, Trump indicated openness to future negotiations, telling reporters: "China wants to make a deal... they just don't know quite how to go about it." He suggested the 125% tariff could be "temporary" depending on how discussions progress.

For other nations, the 90-day pause is designed to facilitate trade talks. Bessent delivered a clear message to international partners: "Do not retaliate, and you will be rewarded."

Peter Navarro, a key Trump ally and White House trade adviser, characterized the announcement as "one of the greatest days in American economic history" and suggested it demonstrated "the art of the reciprocal trade deal."

The updated tarrifs that were announced after the pause on 9 April

Confusion over specifics as implementation begins

Despite the broad strokes of the announcement, confusion remained over specific implementation details. While Bessent initially indicated that Mexico and Canada would be included in the 10% baseline tariffs, a subsequent White House backgrounder contradicted this, suggesting imports from these two countries would still face tariffs as high as 25%.

The White House clarified that tariffs on Mexico and Canada represent a separate matter related to fentanyl smuggling and illegal immigration, distinct from the broader trade discussions.

Trump also suggested certain companies hit particularly hard by tariffs might receive exemptions, stating his administration would determine eligibility "instinctively."