Tariff Reversal

U.S. President Donald Trump’s new reciprocal tariffs went into effect at the stroke of midnight on Wednesday. However, within hours of urging Americans to “BE COOL! Everything is going to work out well,” Trump announced a pause on those same tariffs for every country except for China, upending weeks of trade policy, rallying global markets, and igniting greater uncertainty about what, exactly, the president’s tariff strategy is.

On Wednesday afternoon, Trump posted on Truth Social that he had authorized an immediate 90-day pause on the higher reciprocal tariffs and lowered them to 10 percent for nearly all affected countries during that time period. Trump said the suspension was due to dozens of nations seeking trade negotiations with the United States.

For China, however, Trump said he was raising the additional duties to 125 percent, up from 104 percent. Earlier Wednesday, Beijing had retaliated for the 104 percent measure with countertariffs that totaled a whopping 84 percent, beginning on Thursday. It is unclear whether China will match the latest tit for tat, as it has effectively done over the past week. “It’s unfortunate that the Chinese actually don’t want to come and negotiate because they are the worst offenders in the international trading system,” U.S. Treasury Secretary Scott Bessent told Fox Business earlier on Wednesday before Trump’s newest policy announcement.

Beijing maintains that Washington’s “practice of escalating tariffs on China is a mistake on top of a mistake, which seriously infringes on China’s legitimate rights and interests and seriously damages the rules-based multilateral trading system.”

Speaking to reporters at the White House shortly after Trump’s announcement, Bessent clarified that the lowered measures for all other countries will not affect other tariffs that the Trump administration has already imposed, such as steel and aluminum duties, or other levies that are still coming down the pipeline, such as on lumber and pharmaceuticals.

The abrupt move came after senior Trump officials, including Bessent, had spent days defending the massive reciprocal tariffs as a necessary remedy to address a national emergency and offering mixed signals on whether they were intended to be permanent or were merely a negotiating tactic.

Indeed, Trump’s about-face appears to have come as a shock to U.S. Trade Representative Jamieson Greer, who was at the House of Representatives on Wednesday for his second day of congressional testimony when the announcement occurred. “It looks like your boss just pulled out the rug from under you,” Rep. Steven Horsford told Greer during the session.

Trump’s sweeping reciprocal tariffs had rocked markets and triggered fears of a global recession. U.S. Treasurys recorded a surge in selloffs on Wednesday, as investors dumped their safest assets for cash; government bonds have traditionally been considered stable during times of economic uncertainty, with the last U.S. dash-for-cash wave occurring at the onset of the COVID-19 pandemic in March 2020. And the U.S. dollar index initially fell across the board on Wednesday compared to the yen, euro, and Swiss franc but has since rebounded after Trump’s about-face.

Stock markets also faced shockwaves on Wednesday. The S&P 500 dipped in the morning prior to Trump’s announcement but then skyrocketed 9.52 percent following news of the 90-day pause; S&P 500 companies have lost $5.8 trillion in stock market value since Trump’s initial tariff announcement last week, marking the deepest four-day loss for the index since the benchmark was created in the 1950s.

It seems the markets’ reactions may have convinced Trump to back off, at least for now. When asked Wednesday afternoon why he decided to pause the reciprocal tariffs, he said, “I thought that people were jumping a little bit out of line. They were getting yippy, you know. They were getting a little bit yippy, a little bit afraid.”

What We’re Following

“Back on track.” Friedrich Merz, the leader of Germany’s conservative Christian Democratic Union (CDU), secured a coalition with the center-left Social Democratic Party (SDP) on Wednesday. The deal ends weeks of negotiations aimed at creating a government that can respond to Trump’s accelerating trade war. “The key message to Donald Trump is Germany is back on track,” Merz said on Wednesday, adding that he plans to boost Berlin’s defense spending and economic competitiveness.

Snap parliamentary elections in February resulted in a lackluster victory for the CDU/CSU, which won just 208 out of 630 seats in the Bundestag. Merz, who is expected to become Germany’s next chancellor, said at the time that he hoped to create a ruling coalition by Easter (or April 20); however, such a task proved more challenging than anticipated, as the far-right Alternative for Germany (AfD) gained 69 seats to become the second-largest party in parliament with 152 seats. Although the CDU and SDP are historically rivals, they both oppose any alliance with the AfD.

Providing shelter. Indonesian President Prabowo Subianto on Wednesday offered to temporarily shelter Palestinian medical evacuees and orphaned children in Gaza. The move is not for permanent resettlement, he said, adding that an estimated 1,000 people may be ready to be evacuated in the first batch and can stay in Indonesia until they have fully recovered and the territory is safe to return to.

Indonesia is the world’s most populous majority-Muslim country and has long been an advocate of Palestinian statehood. “This is something complicated; it’s not easy, but I think it encourages the Indonesian government to play a more active role” in the war, Subianto said.

The president’s announcement kicked off his weeklong trip to the United Arab Emirates, Turkey, Egypt, Qatar, and Jordan. Some of these nations have also agreed to accept Palestinian refugees on humanitarian grounds, though Egypt and Jordan have both refused to permanently host Gaza’s entire population, as a Trump-proposed, Israeli-backed displacement plan has suggested they do.

Deadly nightclub disaster. The roof of iconic nightclub Jet Set in the Dominican Republic collapsed early Tuesday, killing at least 124 people and injuring more than 250 others. The incident occurred nearly an hour after singer Rubby Pérez began a merengue set to an audience that included high-profile artists, athletes, and politicians. Among those killed were Pérez, several professional baseball players, and Monte Cristi province Gov. Nelsy Cruz; Cruz was the first person to alert Dominican President Luis Abinader about the disaster, calling him while she was still trapped under the rubble.

It is still too early to tell what triggered the collapse, though Jet Set’s owners are reportedly cooperating with authorities to determine the cause. “What happened has been devastating for everyone,” the club said in a statement. “We want you to know that we are with you and that we share your anguish.” Search-and-rescue efforts are ongoing, and on Wednesday, Abinader declared three days of mourning for the Dominican Republic.