Asian nations experienced relief as U.S. President Donald Trump opted to temporarily suspend many of his reciprocal tariffs for 90 days. This pause allows for negotiations with numerous major U.S. trading partners, with a notable exclusion of China. The decision has resulted in Chinese goods facing a steep 125% tariff, following Trump’s criticism of Beijing’s “lack of respect.”
Following the announcement of the tariff pause, Japan’s Nikkei 225 index saw a 9.1% increase on Thursday. South Korea’s KOSPI index rose by 6.6%, the Taiwan Taiex index increased by 9.3%, and Australia’s S&P/ASX 200 climbed by 4.6%. However, these indices remain below their levels prior to Trump’s “Liberation Day” announcement, which had considerable effects on governments, companies, and markets.
Despite the high tariffs imposed on China, Chinese markets saw a slight uptick. Hong Kong’s Hang Seng Index gained 2.1%, marking its third consecutive day of increases since Monday’s significant plunge, which was the biggest since 1997. The CSI 300 also rose, recording an increase of 1.3%.
Southeast Asian markets, which were also impacted by some of Trump’s highest “Liberation Day” tariffs, showed signs of recovery. Vietnam’s VN-Index increased by 6.8%, as the pause eased concerns that the export-reliant economy would face a 46% tariff.
Despite Trump’s last-minute decision, average U.S. tariff rates remain at their highest since the 1930s. In addition to the 125% tariff on Chinese goods, the U.S. has implemented a universal 10% tariff on all imports, alongside 25% tariffs on imported cars, steel, and aluminum. Additionally, there is the potential threat of 25% tariffs on countries utilizing Venezuelan oil, as well as on imported pharmaceuticals and semiconductors.
Had the full “Liberation Day” tariffs remained in place, the average U.S. tariff rate would have reached 27%. Trump’s pause has reduced this to 24%, as per Bloomberg’s estimates, but it still exceeds the 2% average rate prior to his second term. Countries such as South Korea, Japan, and Australia continue to be adversely affected by a more protectionist U.S., even if they eventually gain a permanent reprieve from “reciprocal tariffs.”
The pause introduces ambiguity regarding the intended purpose of the tariffs. Initially, Trump’s officials, including Commerce Secretary Howard Lutnick and Senior Trade Advisor Peter Navarro, argued that the tariffs aimed to repatriate manufacturing to the U.S. and rebalance trade with exporting countries. Post-pause, there is a narrative shift suggesting that tariffs are being used as leverage to negotiate new trade deals with partners like Japan, Korea, and Vietnam, while isolating China. Treasury Secretary Scott Bessent commented that Trump had successfully provoked China into a disadvantageous position.
The pause has initiated a three-month period during which trading partners must negotiate agreements. Following the pause, Vietnam announced plans to begin trade negotiations with the U.S., seeking to eliminate as many non-tariff barriers as possible. Taiwan is considering purchasing $200 billion worth of U.S. products, particularly liquefied natural gas, to reduce its trade surplus.
Negotiations between Japan, South Korea, and the U.S. are ongoing, aiming to reduce both the reciprocal tariffs and the 25% tariff on imported cars. The most significant question involves China. On Wednesday, Trump predicted that China has an interest in making a deal and indicated he would not further increase tariffs on the country.
Beijing’s retaliatory measures against Trump’s so-called reciprocal tariffs led to the imposition of 84% tariffs on U.S. goods, effective today. A note from Deutsche Bank suggests the world is still headed towards an economically discordant separation between the two largest economies, with no immediate signs of compromise from either side.
In response to the tariff threat, Chinese officials are meeting to discuss further economic stimulus to shield the economy, potentially bolstering technology and consumer spending, as reported by Bloomberg. On Thursday, Goldman Sachs revised its 2025 GDP growth forecast for China down to 4.0% from 4.5%, estimating that up to 20 million workers could be impacted by a decrease in U.S.-bound exports. The combination of Trump tariffs, declining exports to the U.S., and slowing global growth may exert “substantial pressure on the Chinese economy and labor market,” according to the bank’s economists.