U.S. President Donald Trump has announced a 90-day pause on the ‘reciprocal’ tariffs his administration had applied to roughly 60 countries.
That means many countries will have their tariffs reduced to a universal rate of 10%, except for China, which will have its tariff increased to 125%.
The announcement was made on the President’s social media platform Truth Social, where he said: “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.”
It comes after the U.S. increased tariffs on China to 104% yesterday, which a Chinese Government spokesperson called “economic bullying”.
Australia’s tariff was always at the 10% rate (which was the minimum rate imposed), so this means there has been no change for the country.
Trump said the 90-day pause would allow “more than 75 countries” that had started negotiations with the White House, seeking to reduce its tariffs, to reach a deal.
The announcement of a pause led to a record-breaking day on the U.S. stock market.
Tariffs
A tariff is a tax on imports. It’s applied to foreign-made goods brought into another country and paid by the importer.
Since coming to power in January, Trump has imposed a range of tariffs on imports to the U.S, including a 25% tariff on Australian steel and aluminium.
The goal of tariffs is to encourage a country’s companies and citizens to buy locally-produced goods, boosting industrial activity. Trump has also claimed trading partners have “ripped off” America.
'Liberation Day'
Last week, on Wednesday (local time), Trump announced new tariffs on all products imported to the U.S.
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Trump displayed a chart of tariffs imposed against the U.S. by other countries and claimed he was charging “approximately half” of that amount in return.
This meant several different rates were given to countries. Australia, which does not have a trade deficit with the U.S., was given the “baseline” rate of 10%.
China
Last week, China was hit with the highest tariff of any country, and has responded by imposing further tariffs of its own on imported U.S. goods.
Because of that response, Trump has incrementally increased China’s tariffs. Yesterday, Trump’s tariff of 104% came into effect on China.
Last night, China retaliated with a tariff of 84% on imports of U.S. goods.
This morning, Trump responded to last night’s retaliation, announcing the increase of tariffs on China to 125%. In his post on Truth Social, Trump said the decision was “based on the lack of respect that China has shown to the World’s Markets.”
Lin Jian, a spokesperson for China’s Foreign Ministry, has said in the past week: “Intimidation, threat and blackmail are not the right way to engage with China.”
“If the U.S... is determined to fight a tariff and trade war, China’s response will continue to the end,” Lin said.
Stock market
The U.S. stock market recorded one of its largest single-day increases since WWII, bringing it back to roughly where it was at the start of April.
Some of the largest U.S. companies have issued official guidance to its shareholders, forecasting lower future growth than originally predicted. Delta Air Lines, for example, reduced its earnings forecast because of “broad economic uncertainty around global trade”.
