Global relief fuels rally while U.S.-China trade war escalates with 125% tariffs and countermeasures
In a stunning overnight twist that jolted global markets back to life, President Donald Trump announced a 90-day pause on tariffs for all U.S. trading partners—except China—following mounting international pressure and intense lobbying from U.S. corporations.
Asian equities responded with a resounding cheer. Japan’s Nikkei 225 surged 8%, South Korea’s Kospi climbed over 5%, and Australia’s ASX 200 jumped 5%, reversing days of tariff-fueled turmoil. European markets were poised for a strong open as well, while U.S. futures soared, echoing an already euphoric Wednesday rally on Wall Street.
China has been explicitly excluded from the pause. Instead, Trump ratcheted up the tariff rate on Chinese imports to a staggering 125%, reigniting the most volatile front of the U.S.-China trade war. In response, Beijing hit back with an 84% retaliatory tariff on American goods and vowed not to “bow down to tax blackmail.”
A Market Reversal on the Back of Policy Whiplash
The 90-day reprieve, announced late Wednesday U.S. time, stunned analysts and investors who had braced for another escalation. Less than 24 hours earlier, Big Pharma stocks tanked and global indices wobbled on fears of sweeping tariffs on medical goods, semiconductors, and consumer electronics.
But with Trump’s executive order signed and delivered—delaying new tariffs for most nations—the tone on trading floors flipped almost instantly.
The Dow Jones Industrial Average spiked 7.87%, gaining 2,962.97 points to close at 40,608.56, marking one of its largest single-day point gains in history. The Nasdaq Composite rocketed 12.16% higher to 17,124.97, while the S&P 500 jumped 9.53% to 5,456.20.
“The market was pricing in Armageddon. Trump gave us a breather—at least for now,” said Evelyn Ramesh, head of global macro strategy at Equinox Capital.
China Pays the Price—And Hits Back
Despite the global celebration, China was singled out, and it didn’t take long to respond.
Chinese officials held an emergency press conference Thursday morning in Beijing, announcing countermeasures including 84% tariffs on a broad basket of U.S. goods—from agricultural exports and automobiles to energy commodities. The Ministry of Commerce said the new measures would be implemented “immediately and indefinitely.”
“China will not be intimidated. These acts of economic coercion will only strengthen our resolve,” said Foreign Ministry spokesperson Zhao Lijian.
Analysts now fear the world’s two largest economies are entering a new phase of economic brinkmanship, even as other nations enjoy a temporary ceasefire.
Winners and Losers in the 90-Day Window
For companies with exposure outside China, the 90-day pause offers a window of opportunity. Exporters in Germany, India, South Korea, and Vietnam are expected to benefit from tariff exemptions, at least in the near term. Shipping, semiconductor, and consumer discretionary stocks posted sharp gains in overnight trading.
But for firms heavily reliant on U.S.-China trade, the outlook remains murky.
Apple Inc., Qualcomm, Tesla, and Boeing—all deeply entangled in the Chinese supply chain—face increasing exposure to Chinese retaliatory duties. Shares of these companies saw muted gains compared to broader market indices, reflecting their geopolitical vulnerability.
Meanwhile, agriculture futures fell, with soybean and corn prices dropping on fears that China’s new tariffs would slash U.S. exports. The American Farm Bureau called the tit-for-tat duties a “devastating blow” to rural economies already reeling from inflation and climate disruptions.
Politics in the Driver’s Seat
The tariff pause appears to be a strategic calculation by the Trump administration amid election-year optics and growing economic uncertainty.
“Trump needed to stabilize markets, especially with CPI data looming and retail investors panicking,” said Ian Goldstein, senior fellow at the Peterson Institute. “But excluding China keeps his base happy while applying pressure where it politically matters most.”
With the 2025 campaign trail heating up, Trump’s economic messaging is increasingly tied to his America First rhetoric—targeting perceived foreign exploitation while promising job creation and industrial revival.
Volatility Is the New Normal
“We’re in the eye of the storm,” warned Fiona Lin, managing director at Apex Asia Capital. “The pause helps sentiment, but underlying tensions remain unresolved—especially with China.”
With China’s retaliatory tariffs in effect and no formal trade talks on the calendar, the geopolitical risk premium remains high. Analysts expect heightened volatility in commodities, industrials, and technology, particularly if diplomatic channels continue to fray.
Looking Ahead: 90 Days on the Clock
The White House has framed the pause as a “review period,” during which it will evaluate compliance from international partners and assess the impact of past tariffs on U.S. industry.
But there is no assurance that tariffs won’t snap back into place—or expand further.
For now, investors have three months to breathe. What happens next will depend not just on economic fundamentals, but on the unpredictable whims of trade politics.
