The S&P 500 rose 9.5 percent after President Trump announced he would pause his “reciprocal” tariffs for 90 days, but economists warned that American importers were not out of danger.
Here’s the latest.
Stocks soared on Wednesday after President Trump abruptly announced he would back down on his “reciprocal” tariffs for 90 days, with the S&P 500 rising 9.5 percent — its sharpest single-day gain since October 2008.
Wall Street’s gleeful embrace of the policy reversal reflected relief that Mr. Trump would not follow through with most of his plans for the tariffs, which had sent markets into a tailspin and threatened to upend global trade.
While many countries would have their tariffs reduced, Mr. Trump said the relief would not extend to China, one of America’s biggest trading partners, ensuring that many American importers were not out of danger. Mr. Trump announced that he would instead raise tariffs on its exports to 125 percent after Beijing announced a new round of retaliation.
The turnabout, which came just days after Mr. Trump declared on social media that he would never change his tariff policies, temporarily calmed the fears of economists who had expressed concerns that the United States might be careening toward a recession of its own making.
Karoline Leavitt, the White House press secretary, said the tariff rate for most countries would be brought down to 10 percent.
In announcing the pause, the White House repeatedly tried to suggest it was part of a premeditated strategy. Ms. Leavitt accused reporters of having “failed to see what President Trump is doing here,” and Scott Bessent, the Treasury secretary, said it was Mr. Trump’s “strategy all along.”
But even as the S&P 500 soared, the index was still down 11.2 percent below its recent high, in February. The abrupt change in course came amid a sell-off in U.S. bonds, which are generally safer investments, and after days of deep losses in financial markets around the globe.
Mr. Trump himself acknowledged that his decision was made in response to the market turmoil, telling reporters Wednesday afternoon that “you have to be flexible,” and that “over the last few days it looked pretty glum.”
The reversal followed another tumultuous day. Before the pivot, Mr. Trump’s latest tariffs had hit nearly all U.S. trading partners, with Beijing offering the starkest response — a total levy of 84 percent on American-made products. That left American companies that import from China still on edge.
“Respite? Further economic suicide?” asked Peter Boockvar, chief investment officer of Bleakley Financial Group. “It will all depend on where you source product from, of course, and unfortunately about $450 billion is still being imported from China.”
Here’s what else to know:
- Defending tariffs: In Washington, Mr. Trump’s trade representative, Jamieson Greer, told a congressional committee that the president was right to label the United States’ trade deficit a national emergency, calling it “a manifestation of the loss of the nation’s ability to make, to grow and to build.” Many economists have criticized Mr. Trump’s focus on trade deficits, arguing that they are a poor metric for judging the quality of a trade relationship.
- European Union: Before the pause was announced, European Union member states voted to approve counter-tariffs against the United States that would take effect on Tuesday, its first response to Mr. Trump’s levies. Documents showed that duties of 25 percent would be applied to a wide range of goods imported from the United States, including products as varied as corn and plate glass.
- Bonds under pressure: A sharp sell-off in U.S. government bond markets showed concerns about the fallout of a trade war. Yields rise when investors sell bonds — pulling down the price of bonds — which can reflect worries about inflation, shifts away from U.S. dollar assets or a need for investors to raise cash to cover losses on other trades. Rising yields push up the cost of borrowing for mortgages, credit cards, business loans and many other rates. The 10-year U.S. Treasury yield jumped to around 4.4 percent, up from below 4 percent at the start of the week.
- Oil prices tumble: U.S. oil prices fell to about $56 a barrel on Wednesday morning, the lowest level in more than four years. The slide in crude prices signals deteriorating confidence in the strength of the economy and has spooked U.S. oil executives, many of whom had backed Mr. Trump. After the tariffs were paused, the prices climbed to more than $62.
- Asian industry: In commercial and industrial hubs across Asia, businesses grappled with the effects of the levies. For some companies, U.S. tariffs have had the unexpected effect of making China a more appealing place to produce in and buy from, as heavy tariffs on other Asian countries have eliminated some motivation to set up shops there.
Howard Lutnick, the secretary of commerce, told reporters today that a move by Canada to retaliate against President Trump’s tariffs would be unwise. Having watched how it went with China, which is now facing 125 percent tariffs after announcing a new round of retaliation, that “would be a really, really bad choice,” he said. Europe had also announced some retaliatory tariffs, Lutnick said, but they don’t start for a couple of weeks.