As was posited earlier today, President Trump had a choice of taking the path of cutting deals with countries interested in negotiating trade agreements or making tariffs an ongoing policy and cratering the economy. Fortunately, the White House decided to pause tariffs for 90 days while sticking with a benchmark of 10% tariffs as agreements are hammered out. Reportedly, the administration will work with trade counterparts to move quickly and set trade agreements.
Markets immediately rocketed higher, erasing much of the recent declines.
This was brilliantly executed by @realDonaldTrump. Textbook, Art of the Deal.
— Bill Ackman (@BillAckman) April 9, 2025
The outlier to all of this is China, which decided to challenge Trump’s aggressive trade policy by slapping 84% retaliatory tariffs on US goods – a significant increase from the previous 34%. Trump singled out China on Truth Social, stating that based on the lack of respect from China, he would be raising tariffs to 125%, adding, “Hopefully in the near future, China will realize that the days of ripping off the USA and other countries are no longer sustainable or acceptable.”
China’s policy of taking over Taiwan, potentially setting into motion a kinetic conflict, now finds itself in a more difficult position as it must decide whether to stand its ground or retreat, potentially appearing weak in the eyes of the Chinese populace.
Howard Lutnick, the Secretary of Commerce, said the world is ready to work with the US to fix global trade, but China has chosen the opposite direction.
Beyond rampant IP theft and the blocking of US firms from owning factories or purchasing land in the country, Chinese authorities leverage tariffs as well as non-tariff barriers to block US participation in the market. The government utilizes policies like quotas, administrative hurdles, and harassment to undermine US activity in the country. The increasing authoritarian posture has led to many firms quietly exiting the country.
While some companies like Apple plan to move manufacturing to other countries and away from China, transitioning away from a country that exports approximately $440 billion to the US will be painful.
While markets celebrated today, the Trump administration still has much work to do to hammer out new trade deals with countries that have committed to coming to the table and leveling the playing field. As markets hate uncertainty, which implies heightened risk, the fact that trade deals are in the works should help markets become less volatile.