US stocks sunk on Thursday, giving back some of the huge gains that followed President Donald Trump’s decision to temporarily lower his sweeping tariffs on dozens of countries, as investors assessed the status of his global trade war.
Trump’s sudden decision on Wednesday to freeze most of his hefty new duties for 90 days brought relief to battered markets and anxious global leaders, even as he ratcheted up a trade war with China.
But his whipsaw approach still has companies worried about the potential fallout and scrambling to prepare for what could happen in three months.
The S&P 500 index was down 5.2 percent on Thursday afternoon, while the Nasdaq dropped 6.1 percent and the Dow Jones Industrial Average was down 4.5 percent.
Speaking at a cabinet meeting, Trump reiterated that there would continue to be “transition difficulty” in the days ahead.
His sudden decision to freeze most of his hefty new duties for 90 days brought relief to battered markets and anxious global leaders, even as he ratcheted up a trade war with China.
In Europe, eurozone government bond yields jumped, spreads tightened, and markets scaled back their bets on European Central Bank rate cuts after Trump’s latest announcement. European shares surged.
The European Union said it would put plans to impose retaliatory tariffs on hold for 90 days. It had been due to launch counter-tariffs on about 21 billion euros ($23.25bn) of US imports next Tuesday in response to Trump’s 25-percent tariffs on steel and aluminium. It is still assessing how to respond to US car tariffs and the broader 10 percent levies that remain in place.
“We want to give negotiations a chance,” European Commission President Ursula von der Leyen said on X.
But she warned that the counter-tariffs could be reinstated if negotiations “are not satisfactory.”
Southeast Asian governments also pledged not to impose retaliatory measures in response to Trump’s tariffs.
Following a video conference among members of the Association of Southeast Asian Nations (ASEAN) on Thursday, economic ministers from the 10-country bloc said in a statement: “Open communication and collaboration will be crucial to ensuring a balanced and sustainable relationship. In that spirit, ASEAN commits to not impose any retaliatory measures in response to the US tariffs.”
The Trump administration is close to reaching agreements with some countries, White House economic adviser Kevin Hassett told reporters.
“USTR [United States Trade Representative] has informed us that there are maybe 15 countries now that have made explicit offers that we’re studying and considering and deciding whether they’re good enough to present the president,” Hassett added, referring to the US trade representative.
But no deals have yet been announced, with Trump telling reporters he cannot just make the agreements “easily”.
When asked what would happen if no deal were to be reached with a country before the 90-day pause expires, Trump said he would revert to the originally announced tariff rates for each country.
“Well, that’s what would happen. I mean, if we can’t make the deal that we want to make, or we have to make, or that’s good for both parties – it’s got to be good for both parties – then it would go back to where we were,” he said.
However, he added he would “see what happens at that time”.
US-China trade war ratchets up
Despite the US president pausing most of the so-called “reciprocal” tariffs, he has ramped up the pressure on China, the world’s second-largest economy and second-biggest provider of US imports, by increasing tariffs on Chinese imports to 125 percent from the 104 percent level that kicked in on Wednesday.
The White House told CNBC on Thursday that the move brings the overall level of the new tariffs imposed by Trump on China to effectively 145 percent, when taking into account the 20 percent tariffs that Trump imposed on China earlier this year, citing fentanyl concerns.
China will follow through to the end if the US persists, Ministry of Commerce spokesperson He Yongqian said. China’s door was open to dialogue, but this must be based on mutual respect, the ministry said.
With the trade war with China in full swing, at Thursday’s cabinet meeting, Trump, however, said that Washington “would love to be able to work” with Beijing again.
He stressed that he has good personal ties with Chinese President Xi Jinping.
“In a true sense, he’s been a friend of mine for a long period of time. And I think that we’ll end up working out something that’s very good for both countries,” Trump said.
China’s yuan hit its lowest level against the dollar on Thursday since the global financial crisis.
Oil prices also retreated by more than 3 percent on Thursday as fears of a deepening US-China trade war and a possible recession eclipsed earlier relief created by Trump’s pause announcement.
Reporting from New York, Al Jazeera’s Kristen Saloomey noted that Apple was among the US companies that are most exposed to a US-China trade war.
“The iPhone maker, of course, produces a lot of its products in China,” she said.
Deborah Elms, the head of trade policy at the Hinrich Foundation in Singapore, told Al Jazeera that if tariffs are set “at 145 percent, there is no trade between the US and China.”
“That is going to create serious headaches for many, including companies based in both locations,” she warned.
Reporting from Washington, DC, Al Jazeera’s Mike Hanna said it was not clear if the US-China trade war would continue to escalate.
“Trump continues to say that he wants to create a favorable negotiating environment. But at what point does he stop ratcheting up from the 145-percent tariffs imposed on China? There has to be some kind of endgame to this,” he noted.
“The cabinet members don’t appear to be asking those questions, publicly at least,” he said.