"Do Not Retaliate": White House Warns After Trump's 125% Tariffs On China

In a stunning turn of events, US President Donald Trump on Wednesday reversed his sweeping tariffs on most nations for at least 90 days. However, he ramped up pressure on China, on which the pause does not apply, further escalating a high-stakes confrontation between the world's two largest economies. 

Instead, Trump slapped a punishing 125 per cent tax on all Chinese goods, while China announced new tariffs of 84 per cent on all US imports, further escalating a high-stakes confrontation between the two largest economies of the world, and fuelling fresh market volatility. The two countries have traded tit-for-tat tariff hikes repeatedly over the past week. 

After making an example out of China, the White House sent a stark warning to trading partners-- "DO NOT RETALIATE AND YOU WILL BE REWARDED."

Meanwhile, China refused to back down against America's aggression, and its 84 per cent tariffs on US imports came into effect at 12.01 pm on Thursday, according to the Chinese state news agency, Xinhua.

Before levies came into force, Beijing's Commerce Minister had said the ‘reciprocal tariffs' by the US are “a serious infringement of the legitimate interests of all countries”.

Per a Xinhua report, an official from the Ministry earlier said that no one would win in a trade war.

"I want to emphasize that there is no winner in a trade war, and that China does not want a trade war. But the Chinese government will by no means sit by when the legitimate rights and interests of its people are being hurt and deprived,” the official said on Wednesday.

Trump's U Turn

Trump's turnabout, which came less than 24 hours after steep new tariffs kicked in on most trading partners, followed the most intense episode of financial market volatility since the early days of the COVID-19 pandemic. The upheaval erased trillions of dollars from stock markets and led to an unsettling surge in U.S. government bond yields that appeared to catch Trump's attention.

"I thought that people were jumping a little bit out of line, they were getting yippy, you know," the American President told reporters after the announcement, referring to a golf term. 

Since returning to the White House in January, the Republican billionaire has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute. The on-again, off-again approach has baffled world leaders and spooked business executives. Trump told reporters that he had been considering a pause for several days. On Monday, the White House denounced a report that the administration was considering such a move, calling it "fake news."

Furthermore, the reversal of the country-specific tariffs is not absolute. A 10 per cent blanket duty on almost all US imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.

The 90-day freeze also does not apply to duties paid by Canada and Mexico, because their goods are still subject to 25 per cent fentanyl-related tariffs if they do not comply with the US-Mexico-Canada trade agreement's rules of origin. Those duties remain in place for the moment, with an indefinite exemption for USMCA-compliant goods.

"Be Flexible'

The day's events cast into stark relief the uncertainty surrounding Trump's policies and how he and his team create and implement them.

US Treasury Secretary Scott Bessent asserted that the pullback had been the plan all along to bring countries to the bargaining table. Trump, though, later indicated that the near-panic in markets that had unfolded since his April 2 announcements had factored in to his thinking. Despite insisting for days that his policies would never change, he told reporters on  Wednesday: "You have to be flexible."

'China Unlikely To Change Strategy'

Experts believe that while Trump's new strategy will come as a relief to many nations, Beijing is unlikely to change its strategy and back down. 

"China is unlikely to change its strategy: stand firm, absorb pressure, and let Trump overplay his hand. Beijing believes Trump sees concessions as a weakness, so giving ground only invites more pressure," Daniel Russel, vice president of international security and diplomacy at the Asia Society Policy Institute, told Reuters.

"Other countries will welcome the 90-day stay of execution — if it lasts — but the whiplash from constant zigzags creates more of the uncertainty that businesses and governments hate," he added

Meanwhile, Trump indicated a resolution with China was possible as well. But officials have said they will prioritize talks with other countries.   

"China wants to make a deal," Trump said. "They just don't know how quite to go about it."