The US president’s about-turn, which came less than 24 hours after steep new tariffs kicked in on most trading partners, followed the most intense episode of financial market volatility since the early days of the Covid-19 pandemic and erased trillions of dollars from stock markets.
This had included 20 per cent for the EU, 24 per cent for Japan, 25 per cent for South Korea, 26 per cent for India, 34 per cent for China, 17 per cent for Israel and 46 per cent for Vietnam.
Traders or at the New York Stock Exchange on Wednesday (Photo: Seth Wenig/ AP)
What tariffs are still in force?
Trump announced that he was authorising a universal “lowered reciprocal tariff of 10 per cent” on almost all US imports as negotiations with global trading partners continue.
The pause also does not apply to duties paid by Canada and Mexico. Their goods are still subject to 25 per cent allegedly fentanyl-related tariffs if they do not comply with the US-Mexico-Canada trade agreement rules of origin.
Trump’s tariff implementation last week erased trillions of dollars from stock markets and led to a surge in US government bond yields.
His on-again, off-again approach has baffled world leaders and spooked markets.
Donald Trump last week announced tariffs in the Rose Garden at the White House (Photo: Carlos Barria/Reuters)The White House press secretary Karoline Leavitt told reporters: “Many of you in the media clearly missed the art of the deal,” referring to Trump’s book and suggesting the switch was long planned.
In recent days even his supporters had voiced concern over the plummeting stock markets, with Jamie Dimon, chief executive of JP Morgan Chase, saying on Wednesday that a recession was a probable outcome of the tariffs.
Bill Ackman, an influential hedge fund manager and Trump supporter, warned the tariffs would cause a “self-induced, economic nuclear winter” that would bankrupt many small businesses.
While Trump’s policies may have frustrated businesses and traders on Wall Street, the tariffs would also have done serious damage to the average American. For those planning their retirement, their 401(k) savings plan is almost certainly invested in the US stock market and would have taken a serious hit in the past week.
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Relief was also felt in the Asian markets. Japan’s Nikkei index — which measures the performance of 225 top Japanese companies — surged 9 per cent. European futures also pointed to big gains.
What does this mean for the UK?
The UK is still facing a 10 per cent baseline tariff. Other than the benefits felt from the pause through the global economy, there is likely to be little change.
The tariffs will also be paid for by the UK businesses that import into the US. This means the US consumer will have to pay for the rise, which could eventually be passed back onto UK customers through US exporters altering their prices.
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