US president Donald Trump announced a 90-day ceasefire in the worsening global trade war last night, but deep uncertainty continues to spook the global economy, financial markets and America’s trading partners after the sudden move.
After repeatedly insisting there would be no change in his tariff policy, Mr Trump blinked last night when he dramatically cut tariffs on all countries to 10 per cent for 90 days – except for China, which has been hit with 125 per cent tariffs immediately.
After days of massive losses on the stock markets since the tariffs were announced last week, the pressure on the Trump administration intensified yesterday with a sell-off of US Treasury bonds which threatened to increase the cost of US government borrowing and put the country’s ability to finance its massive deficits in doubt.
The trend caused significant disquiet among market analysts, who warned of potentially catastrophic consequences for the global financial system if there was a mass sell-off of US Treasuries – which some market watchers feared was already under way.
After a bullish speech to Republicans in Washington, DC, on Tuesday evening, Mr Trump continued to insist he was not for turning and promised that more tariffs on pharmaceuticals would soon follow.
But as markets wobbled again on Wednesday morning, Mr Trump made what appeared to be efforts to restore some confidence in a series of social-media posts.
“BE COOL! Everything is going to work out well,” he posted in midmorning as global financial markets continued to show signs of turmoil. “The USA will be bigger and better than ever before!”
A few minutes later he added: “THIS IS A GREAT TIME TO BUY!!!”
But the president’s exhortations failed to reassure markets and as the day went on there were increasing worries about the bond market, traditionally a safe haven for investors in times of turmoil on the markets, as the trade war seemed set to worsen.
[ US tariffs: Why Trump U-turned on his bombastic tariffs for most of the worldOpens in new window ]
China imposed 84 per cent tariffs on US goods in return for US tariffs of more than 100 per cent on Chinese imports. In Brussels, European Union member states voted to begin retaliating against the US tariffs after they came into effect on European imports yesterday morning.
Yesterday evening Mr Trump announced an abrupt U-turn in a lengthy social media post.
Mr Trump said he would implement a “90-day pause”, reducing the tariffs announced last week to 10 per cent. This means the 20 per cent tariff on Irish and other EU goods has been paused for now and will stand at 10 per cent.
He said this applied to countries that “have not, at my strong suggestion, retaliated in any way, shape, or form against the United States”.
The EU’s retaliatory tariffs have not yet come into effect.
But Mr Trump also said he would raise the tariff on Chinese goods to 125 per cent “effective immediately” – intensifying the conflict between the world’s two most powerful economies and setting the stage for further uncertainty as other countries decide how to react.
Last night, Mr Trump said he would go ahead with pharma tariffs to get companies to relocate to the US, though Tánaiste Simon Harris said he hopes the 90-day period would give a chance to negotiate on this
Markets surged on the news, with the S&P 500 up 9.5 per cent and the Nasdaq, where many tech companies are quoted, up by 10 per cent. Demand for US Treasury bonds stabilised after the announcement.
Speaking in Washington, DC, last night after a meeting with US secretary of commerce Howard Lutnick, Mr Harris said lower tariffs would come as a relief to Irish exporters but that further contacts between Washington and Brussels were needed to clarify this.
He said he told Mr Lutnick what was needed was “substantive and meaningful engagement” between Europe and the US “because if we have seen anything in the last few days it is the turmoil and uncertainty the tariffs have brought”.
He said Mr Lutnick told him Mr Trump had “five sectors that he wants to take action in relation to tariffs and pharma is one of them”.
“I certainly made the point that actually Europe and Ireland is not the challenge here: that we actually have an opportunity to collaborate in a way that is good for the US, good for Ireland, good for the EU.”
US treasury secretary Scott Bessent said the US would negotiate new trade deals with partners. “Every country in the world who wants to come and negotiate, we are going to hear you,” he said.
White House press secretary Karoline Leavitt sought to present the move as part of a pre-planned master strategy by Mr Trump, rather than a reaction to potentially catastrophic developments on the markets.
