The world was left waiting Donald Trump’s next move after his tariff climbdown.
Stock markets initially surged on Thursday after the US President announced a 90-day “pause” on sky-high levies on 75 countries. But the U-turn – with critics suggesting Trump blinked first – came as the US upped its tit-for-tat war with China by hiking import tariffs to 125%.
The President added to the air of confusion when, hours after backtracking, he wrote on social media: “What a day, but more great days coming!!!”
US broadcaster CNBC said it had been told by the White House that the tariff on China was not 125%, but 145%, as it was on top of a 20% levy already in place to force Beijing to stem the flow of the devastating drug fentanyl. A 10% levy on UK exports to the States remains in place, plus a punishing 25% tariff on cars and steel.
Home Secretary Yvette Cooper said Britain should remain cautious in the wake of President Trump’s pause. She told Sky News: “We are seeing changes all the time. We are seeing quite a lot of global instability. We are seeing that in the economy, we are seeing it also on security, on defence issues. But I think that just comes back to the approach that we have taken – it’s the plan for change the Prime Minister’s set out, maintaining that stability in the face of the different turbulences. We are not keeping a running commentary on different trade negotiations, on the different approaches that other governments are taking.”
Earlier Keir Starmer said Britain must not just “sit back and hope” but “rise to the moment” in the face of the tariff crisis. The Prime Minister said the UK should “recognise where our future lies” and accept that “the world is changing, and we as a country must change with it”, following a week of panic in the markets over Washington’s trade policy.
Attention turned to what made the President go back on his tariff pledge. While trillions have been wiped off global stock markets, experts believe it was a potential spike in US borrowing costs and warnings from Wall Street bankers and billionaire backers about the risk of recession that proved decisive.
The yield – or rate – on 10-year US Treasury bonds jumped to 4.45% before his climbdown, from less than 3.9% earlier this week. It risked driving up repayments on America’s debt, which already stand at £930billion on its colossal £29trillion national debt, with half needing to be refinanced in the next three years, explained Russ Mould, investment director at broker AJ Bell. There is also speculation that some of the spike in bond rates was due to China and Japan, big holders of Treasuries, selling, potentially to put pressure on the President. The sharp sell-off in bond markets sparked comparisons to former Tory PM Liz Truss’s mini-Budget meltdown.
Stock markets jumped in Asia and Europe – with the UK’s FTSE 100 leaping 244 points, or more than 3% – but Wall Street’s main indexes fell after a blistering rally on Wednesday, on mounting worries over the economic impact of President Trump’s multi-front tariff war. All three major US stock indexes suffered steep losses, forfeiting much of the previous session’s gains.
It followed a press conference in which the President said of China: “All we are doing is putting it back in shape and resetting the table and I am sure we will get along very well. I have great respect for President Xi. He has been a friend of mine for a long period of time. I think we will end up working out something that is good for both countries.”
President Trump claimed he was “very close” to striking a trade deal with other countries among the 75 were tariffs have been paused. “I could make very deal in one day,” he declared, adding: “I could do this all in one day.” But went he went on: “We want to make a deal that is proper.”
He also warned that the additional tariffs put on hold would kick back in if deals can’t be struck. “That is want will happen if we can’t make the deal that we want to make,” he said, adding. “It has to be good for both parties.”
David Morrison, an analyst at Trade Nation, said: “The immediate danger is over. But investors are… keenly aware that uncertainty still shrouds the markets.”
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