President Trump Pauses Tariffs Globally, Raises Chinese Tariffs to 125%

President Trump Pauses Tariffs Globally, Raises Chinese Tariffs to 125%

On April 9, 2025, President Donald Trump announced a 90-day suspension of most newly imposed tariffs, while simultaneously escalating tariffs on Chinese imports to 125%. This policy shift prompted significant reactions across financial markets and among policymakers.

The United States and China have been engaged in a protracted trade dispute characterized by reciprocal tariffs and negotiations. In February 2025, President Trump imposed a 10% tariff on Chinese imports, citing national security concerns under the International Emergency Economic Powers Act (IEEPA). China responded with countermeasures, including tariffs on U.S. goods and export restrictions on key minerals. The escalation continued with the U.S. threatening to double tariffs on Chinese imports in late February.

President Trump's April 9 announcement introduced a 90-day pause on most newly imposed reciprocal tariffs, excluding those on China. During this period, a universal 10% tariff rate will be maintained while engaging in country-specific negotiations. Concurrently, tariffs on Chinese imports were increased to 125%, a significant escalation aimed at pressuring China into more favorable trade terms.

The announcement had an immediate and profound impact on financial markets. The S&P 500 surged by 9.5%, the Nasdaq Composite jumped 12%—its largest one-day gain in 24 years—and the Dow Jones Industrial Average rose nearly 8%, surpassing 40,000 points. Technology and semiconductor companies, such as Microchip Technology and Tesla, experienced substantial gains, with increases of over 27% and 22%, respectively.

The shift in trade policy has led traders to adjust their expectations regarding Federal Reserve interest rate cuts. Prior to the announcement, market participants anticipated an earlier start to rate cuts in May, with at least four quarter-point reductions throughout the year. Following the tariff pause and increase on China, expectations have shifted to a delay until June, with only 75 basis points of reductions projected for the year. This change reflects a reassessment of economic risks and monetary policy outlook in response to evolving trade policies.

The administration's mixed approach—pausing tariffs on most countries while escalating them on China—has been met with criticism and confusion. Lawmakers, including Senator Mark Warner and Senator Ted Cruz, have expressed frustration, with Cruz acknowledging that tariffs function as taxes on American consumers. Observers have criticized the unpredictability of Trump's trade policies, noting they appear driven more by impulse than strategy.

This comprehensive overview provides a foundation for understanding the recent developments in U.S. trade policy, their immediate market impacts, and the broader economic and political implications.