Hours after his global trade sanctions package went into effect, and amid a volatile Treasury bond market, Donald Trump put the brakes on his tariff war and announced a 90-day pause for most U.S. trading partners, with the exception of China.
Trump’s decision, which took even his trade representative, Jamieson Greer, who was testifying at the time in the House of Representatives, by surprise, came amid not only a drop in the major New York Stock Exchange indexes, but an imbalance in the Treasury bond market, the most solid instruments in the U.S. financial system.
Traditionally, bond yields rise in periods of financial volatility, but on this occasion – for the first time in recorded history – yields fell, which could reflect capital flight, according to experts.
Trump’s decision raises tariffs on China to 125 percent, but maintains a reciprocal levy of 10 percent for most countries during the pause period.
The news triggered one of the steepest stock market rallies in 16 years, partially recovering the losses of the past two weeks.
In the case of Mexico and Canada, Scott Bessent, Secretary of the Treasury, sowed confusion when he agreed to reporters that the two U.S. trading partners would be taxed at 10 percent, like all other countries except China.
However, the White House clarified that they were never on the reciprocal tariff list and will continue to be subject to the 25 percent tariff on steel and aluminum, as well as 25 percent on auto exports that do not comply with T-MEC rules of origin.
Without acknowledging a failure of the strategy, President Trump told reporters that more than 75 countries have already approached the United States to try to reach some agreement.
“Now the bond market looks beautiful,” he wrote shortly thereafter on the social network Truth Social.
Countries that had already offered zero tariffs on U.S. goods include Vietnam, Argentina and Israel, among others.
His decision came amid deepening fractures in conservative ranks, especially in the U.S. Senate, which were reflected during Greer’s appearance.
A parade of foreign officials to Washington is now expected, as requested by the White House, to seek to negotiate bilateral agreements and try to clear the uncertainty in the global trade and financial system over the next 90 days.
Source: El Financiero