At the behest of industry, the White House announced this 90-day pause on these country-specific tariffs. This does not entail additional responsibilities for China, and the announcement has had a very favorable impact on international markets. The administration’s move is an indication of responsiveness to extreme market conditions, and Wall Street stocks soared after the announcement. The U.S. has gone all-in on raising trade taxes on Beijing. This latest action is further evidence of the deepening conflict in the U.S.-China trade relationship.
The administration’s announcement comes against a backdrop of increasing tariffs between the U.S. and China. In retaliation to U.S. tariffs, China has retaliated by increasing its own tariffs on U.S. exports up to 84%. As such, this retaliation represents a dramatic increase. It follows in the wake of President Donald Trump’s tariffs on Chinese imports, pushing the cumulative tariff rate a breathtaking 104%. The cumulative impact of the long-running trade war has forced Beijing to increasingly rely on retaliation and World Trade Organization–style grievances.
Ursula von der Leyen, President of the European Commission, welcomed the U.S. decision to pause reciprocal tariffs against several nations. Specifically, she underscored that the absence of clear, predictable trade conditions are important to restore the global economy’s stability. Furthermore, she emphasized the European bloc’s steadfast resolve to participate in good faith negotiations with the White House.
“It’s an important step towards stabilizing the global economy. Clear, predictable conditions are essential for trade and supply chains to function,” – Ursula von der Leyen
White House duties on imports from China have reached as high as 125%. Our global economic partners are all watching to see how events continue to play out. Analysts predict the recent developments will have profound effects on global trade patterns and negotiating strategy.
In our view, the administration deserves credit for this step, as it is clearly a recognition of the state of the market today.
“The administration is finally signalling responsiveness to the very extreme market conditions we highlighted in the morning. At the margin, this should reduce the probability that such an extreme policy mix returns,” – George Saravelos
While this means relief from tariffs for now, many are still worried about the potential long-term repercussions of Trump’s reciprocal tariffs policy. As Deutsche Bank’s George Saravelos put it, the economy has been left with a long aftertaste of unstable policy. That damage doesn’t go away, even with tariffs permanently suspended.
“Even if the tariffs are permanently suspended, damage has been done to the economy via a permanent sense of unpredictability in policy,” – George Saravelos
Some of these moves are companies’ responses to recent conditions. American companies are largely defaulting to ex-China supply chains. They are looking into ways of coming back to the U.S. or collaborating with other countries that have better tariff arrangements. One prominent investor, Bill Ackman, thinks China’s time is running out. In his view, Chinese firms have had to learn how to adjust their strategies with continuing unpredictability around tariffs.
“Every American company is immediately moving their supply chains out of China back to the U.S. or to trading partners of the U.S. who are likely to make favorable tariff deals with the U.S. Time is not China’s friend,” – Bill Ackman
With negotiations continuing, all the planet’s eyes are focused on the observers. This will no doubt bolster China’s sense of urgency to get to the table sooner with substantive commitments to address harmful trade policies and practices. Chloe Taylor, an economic analyst, pointed out that recent developments will resonate among global economic partners during forthcoming trade negotiations.
“The events of the last few weeks will resonate amongst global economic partners during the upcoming negotiations on trade and indeed for many years to come. The desire to build greater strategic independence from the US across all fronts will be here to stay,” – Chloe Taylor
While some leaders express hope for improved trade relations, others caution against complacency regarding potential economic instability stemming from tariffs. Von der Leyen made clear her opposition to tariffs. In light of this, she is urging a zero-for-zero tariff elimination deal between the European Union and United States.
“Tariffs are taxes that only hurt businesses and consumers. That’s why I’ve consistently advocated for a zero-for-zero tariff agreement between the European Union and the United States,” – Ursula von der Leyen