Key Points

  • U.S. President Trump announced on Wednesday a 90-day pause on some tariffs on goods from most U.S. trading partners, while raising tariffs on imports from China to 125%, accusing Beijing of "extortion" against the U.S.
  • More than 75 countries have contacted federal officials seeking trade negotiations and have "not retaliated in any way," Trump said, prompting a partial reversal of the multi-day decline in U.S. stocks.
  • "I have authorized a 90-day pause and, during this period, significantly reduced reciprocal tariffs to 10%, effective immediately," he said on Truth Social, referring to tariffs that took effect earlier Wednesday.

In-Depth Analysis

Trump announced a partial withdrawal from a trade war that had sparked predictions of a recession and turmoil in bond and stock markets.

JPMorgan Chase CEO Jamie Dimon said Wednesday, before Trump's announcement, that the barrage of tariffs would trigger a recession.

"I will defer to my economists at this moment, but I think that is likely the outcome," Dimon said in an interview with Fox Business.

"I always remind people that markets are not always right, but sometimes they are, and I think they are right this time," Dimon said, noting that business confidence is weakening.

Trump faced pressure from multiple sides, including Wall Street, academia, and Capitol Hill, to pause the tariffs.

"Developments over the past 24 hours suggest we may be heading toward a serious financial crisis entirely caused by the U.S. government's tariff policy," former U.S. Treasury Secretary Lawrence Summers said Wednesday on X, before Trump's partial exemption.

"Long-term interest rates are jumping, even as stocks fall sharply," said Summers, a Harvard University economics professor. "We are being treated by global financial markets as a problematic emerging market."

Summers was not reassured by Trump's 90-day pause.

"Even their new institutional tariffs are close to Smoot-Hawley levels, costing middle-class families nearly $2,000," he said. "We are far from out of the woods. Much credibility has been lost. Be afraid."

The 10-year U.S. Treasury yield, a benchmark for mortgages, corporate borrowing, and other debt, rose to 4.35% on Wednesday, up from 3.87% on April 4.

"Stock and bond market vigilantes are signaling that the Trump administration may be playing with liquid nitroglycerin," Ed Yardeni, president of Yardeni Research, said in a research note to clients on Tuesday.

"Fixed-income investors may begin to worry that China and other foreign investors may start selling U.S. Treasuries," Ed Yardeni said, noting that the White House may need to announce a 90-day extension.

Trump raised tariffs on imports from China to 125%, after Beijing said it would impose 84% retaliatory tariffs on U.S. imports starting Thursday.

If the tariffs Trump announced last week remain in effect for the rest of 2025, the Conference Board estimates the U.S. economy will contract by 1.2% this year, the unemployment rate will rise from 4.2% to 4.7%, and 1.1 million workers will lose their jobs.

"The bottom line is that tariffs are good for no one, and they are certainly more damaging to the economy that imposes them than to the economies on which they are imposed," Dana Peterson, chief economist at the Conference Board, said Wednesday in a webcast.

"When economies retaliate, we see overall growth slow, because it simultaneously reduces exports and imports, as you are destroying demand and also disrupting supply," she said.

However, the Conference Board is not predicting a recession in 2025, said Yelena Shulyatyeva, the organization's senior U.S. economist, noting that the U.S. and trading partners may negotiate lower tariffs.

Instead, assuming some reciprocal tariffs are imposed, GDP could grow 1.6% in 2025, compared with 2.8% growth last year, Shulyatyeva said.

"Growth will slow significantly, but at the same time, the fundamentals of the U.S. economy will allow it to weather the storm to some extent," she said.