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President Donald Trump speaks as he signs executive orders and proclamations in the Oval Office at the White House on April 9, 2025.
The Truth will set tariffs free
With stock markets plunging and US Treasury yields reaching new heights, US President Donald Trump finally reneged on parts of his widescale tariff plan on Wednesday, declaring a 90-day pause to the far-reaching “reciprocal” levies that he introduced just one week ago while leaving a 10% across-the-board duty in place. He also escalated the already-burgeoning trade war with China by increasing the tariff on their imports to 125%.
“I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!” Trump declared on Truth Social.
Trump’s announcement brought some much-needed relief to the countries facing these tariffs.
“This is a much smaller tariff wall. It is less disruptive. It has the potential for landing in a better place with most of the US trading partners,” said Eurasia Group’s geoeconomics expert Jens Larsen.
All in a day. The S&P 500 index surged more than 9% within a few hours of the announcement, bringing some rare good news to the American markets in an otherwise-tawdry week. The Nikkei jumped 9% on Thursday, recording its second-best ever day. As for China, Trump said the 125% tariff would be implemented immediately, before expressing optimism that the two superpowers could reach a deal. Beijing had announced earlier on Wednesday that it was imposing an additional 50% tariff on US imports, matching the extra duty that Trump had placed on Chinese imports on Tuesday and bringing the total levy to 84%.
Not out of the woods yet. Though stocks rose following Trump’s pause, Treasury yields haven’t fully recovered from the sharp moves of earlier this week, reflecting some potential damage to the US economic brand. The dollar has continued falling, too. The political ramifications of this are potentially more widespread than any market drops, as the higher yields make it more difficult for small businesses to access loans, with knock-on effects for the US economy.
“Fundamental uncertainty remains. Not only could tariffs be implemented in the future, but the predictability and credibility of US economic policy has taken a serious hit,” Larsen added. “And at the end, we still end up with a more rapidly fragmenting world.”
EU and Chinese flags in an illustration.
The EU extends a hand toward China
European leaders have much to worry about when it comes to trade and economic growth. In March, Donald Trump imposed 25% tariffs on steel, aluminum, and cars coming from Europe. Last week, he added a 20% tariff on virtually everything else that Europe exports to the US. On Wednesday, the EU responded by announcing tariffs on a broad range of US-exported products that could affect about $23 billion worth of goods. Then, later on Wednesday, Trump suddenly included the EU among those who would see tariff rates fall back to 10%. The whiplash from Washington continues.
But European leaders are also concerned about China, which continues to flood the EU with goods, particularly electric vehicles, that undercut European manufacturers on price. That’s a problem that could get worse quickly if Chinese goods normally destined for the US are diverted by Trump tariffs toward Europe – a problem that looked even more serious after Trump’s Wednesday announcement that he would raise the “tariff charged to China by the United States of America to 125%, effective immediately.”
European Commission President Ursula von der Leyen held a call with Premier Li Qiang earlier this weekand said afterward that EU and Chinese leaders should work together toward a “negotiated resolution” to any trade conflicts between them and provide “stability and predictability” for the global economy.
There is also an opportunity here for President Xi Jinping. China has a strategic interest in helping to divide the US from Europe. Demonstrating to European leaders that China can become a force for economic stability at a time when Trump is waging a trade war on allies and rivals alike would further that goal.US President Donald Trump attends a bilateral meeting with China's President Xi Jinping during the G20 leaders summit in Osaka, Japan, June 29, 2019.
China vows retaliation as US tariffs take effect
With the Trump administration’s reciprocal tariffs taking effect on Wednesday, the US’s largest trading partner, China, has signaled that it is not backing down from a trade war. Beijing has promised to “fight to the end” after Donald Trump imposed 104% levies on China. Sure enough, the Mainland Kingdom announced on Wednesday that it would impose an additional 50% tariff on US imports, matching Trump’s latest hike.
According to Eurasia Group China expert Lauren Gouldeman, unofficial government-linked sources have indicated that Beijing is prepared to implement six other measures in retaliation, including:
- Halting collaboration on fentanyl-related efforts
- Limiting agricultural exports from the US
- Imposing restrictions on US poultry imports
- Blocking the sale of American services in China, such as design, consulting, financial, and legal services
- Banning US films (Sorry, “A Minecraft Movie”)
- Launching investigations into the intellectual property practices of American companies
These steps aren’t just reactionary — they reflect a strategic shift. “Beijing has been preparing for decoupling for years,” says Gouldeman. “So it will continue to follow its playbook of stepping up support to safeguard the domestic economy and finding alternative markets for trade and investment.”
The EU, meanwhile, has said it is open to working with China to stabilize the global economy, a sign that trade alliances could be realigning to circumvent the US. However, the bloc is also concerned about Chinese products flooding their markets.
Speaking of markets, stocks slid back down the slippery slope on Wednesday. Japan’s Nikkei closed nearly 4% down, Europe’s Stoxx 600 dropped 3% Wednesday morning, and futures on US indices also headed backward. Tuesday’s brief respite seems like a fever dream.
There is still room to maneuver: Beijing has reiterated its openness to negotiations, provided the US first removes its unilateral tariffs. But the Trump administration has signaled that it will stay the course to reshore supply chains. Going even further, the US president announced yesterday that he will soon announce “major” tariffs on pharmaceutical imports, which had been exempt from the “reciprocal” rates announced on “liberation day.”
We’ll be watching to see whether bilateral trade survives, but in the meantime, China has a well-stocked arsenal of memes going viral, making fun of the American dream of re-industrialization.Demonstrators rally against President Donald Trump and his adviser Elon Musk during a Hands Off! protest on the Washington Monument grounds in Washington, DC, on April 5, 2025.
Trump’s tariffs trigger aftershocks at home and abroad
US President Donald Trump’s “Liberation Day” tariffs have been met with anger, outrage, and disbelief in every corner of the world – including islands inhabited solely by penguins. At last count, at least 50 countries want to talk trade with Washington, while in the US, opposition to Trump’s presidency is getting organized. Here’s a look at this weekend’s reactions.
In America: Protests, pleas, and pride
From San Francisco to Tulsa to DC, protesters took to the streets on Saturday in over 1,400 demonstrations across all 50 states, demanding that Trump and his “billionaire friends” take their “Hands Off” programs like Medicare and Social Security. While the protests were not specifically aimed at the tariffs, many demonstrators denounced their impact on consumers and retirees, who feared for the future of their investments in the wake of tariff-induced market turmoil.
Meanwhile, top tech and finance leaders — including reps from Apple, Goldman Sachs, and Meta — reportedly plan to fly to Mar-a-Lago to urge Trump to reconsider his tariff plans. Their message: Tariffs are tanking investor confidence and threatening America’s innovation edge.
In the Midwest, it’s a different story. In Iowa, Ohio, and the Dakotas, many in Trump’s base are cheering. Farmers, small manufacturers, and assembly line workers, angry at the impact of offshoring, say the tariffs finally put America first. As a candy store manager in small-town Ohio told the BBC, “If tariffs bring companies and business back to hardworking American people like the ones who live here, then it’s worth it.”
Overseas: Calls for unity, calculated countermeasures
Abroad, in the words of UK Prime Minister Keir Starmer, the consensus is that “the world as we knew it has gone.” The EU is promising a coordinated response in the coming days with retaliatory tariffs on a host of American goods, including diamonds, meat, cereals, wine, wood, clothing, chewing gum, dental floss, vacuum cleaners, and toilet paper. (In a curious twist, Trump adviser Elon Musk suggested on Saturday to a far-right Italian party that the US and Europe form a zero-tariff free trade zone, saying that this “has certainly been my advice to the president.” We’ll see whether Trump takes it.)
In Asia, responses have been mixed. Indonesia and Taiwan’s governments have opted not to retaliate, while Vietnam’s President To Lam has already been on the phone with Trump, proposing a deal to eliminate tariffs entirely between the two nations. In contrast, China is digging in its heels, placing export restrictions on rare earths in addition to reciprocal tariffs of 34% on US goods. Both measures were announced on Friday after two days of stock market meltdowns, which continued into Monday, as the Nikkei plunged 7.8%, while two other Asian indexes had record losses for a single day. Wall Street is also set for another week of turmoil after Dow Jones futures fell 1,500 points (over 3.5%) late Sunday.
Responding to the continued market downturn, Trump said Sunday night that “sometimes you have to take medicine to fix something.”
Three big shocks facing the global economy - Zanny Minton Beddoes
According to The Economist editor-in-chief Zanny Minton Beddoes, 2025 is shaping to be a historic turning point defined by three massive global shocks. “Each of which is big enough for our grandchildren to have a chapter in their history books,” she warns on GZERO World with Ian Bremmer.
The first is geopolitical: the United States, once the architect of the global alliance system, is now actively challenging—and possibly undermining—it. The second is economic: the U.S. has abandoned free trade in favor of escalating tariff wars, threatening the global trading system that has defined the past 80 years. And the third, perhaps most transformative, is technological: the rapid rise of artificial intelligence, which is reshaping industries and economies faster than governments can respond. The combination of these three forces, Beddoes argues, creates massive uncertainty with the potential for severe damage.
While acknowledging that some aspects of the Trump administration’s policies—such as cutting bureaucracy and rationalizing government—may have merit, Beddoes is deeply concerned about its overall trajectory. “I just find the combination of this… bullying, transactional approach, where the view is that your gain must be my loss… fundamentally misguided,” she says. With global institutions struggling to keep pace with these shifts, the question is no longer whether the old order will survive—it’s whether the world can build a new one before chaos takes hold.
Watch full episode: Trump’s trade war: Who really wins?
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US President Donald Trump speaks during an executive order signing in the Oval Office of the White House in Washington, DC, on Feb. 10, 2025. He ordered a 25% tariff on steel and aluminum imports, escalating his efforts to protect politically important US industries with levies hitting some of the country's closest allies.
A Trump economy caution light begins to flash
US inflation rose to 3% in January, surpassing the expectations of many economists. This increase is driven at least in part by a sharp jump in egg prices, the result of an avian flu outbreak. But there may be other pressures at play that can create serious political challenges for President Donald Trump and two of his policy priorities.
Eurasia Group, our parent company, warned in its Top Risks report for 2025 that Trump’s use of tariffs would put upward pressure on the prices Americans pay for goods and services. When US consumers face fewer affordable options on many goods, the report warned, inflation will rise again, leaving interest rates higher and slowing growth.
But Trump’s immigration policy, which could deport up to 1 million people in 2025 and as many as five million over his four-year term, could be even more inflationary. Mass deportations, the report warns, “will shrink the US workforce, drive up wages and consumer prices, and reduce the productive capacity of the economy.”
If this forecast is correct, investors will put downward pressure on stock market performance in the coming months in anticipation that higher inflation will encourage the US Federal Reserve Bank to leave interest rates higher for longer — and perhaps even to raise rates late in 2025.
History shows that when inflation rises, stock prices fall, and interest rates are high, US presidents see a drop in their approval ratings. If the inflationary pressures reflected in January’s inflation numbers have staying power, and tariffs and deportations really do make inflation much worse and send Trump’s approval numbers south, will the president alter policy course on two of his signature campaign promises? That’s a question that will be watched closely by governments around the world.
Leaders at Davos are turning "anxiety into action"
The shifting geopolitical landscape and uncertainty surrounding the future of AI have stirred anxiety among those gathered in Davos. Yet, there are glimmers of hope. “The most important thing for me is really to turn the anxiety into action," said Teresa Hutson, Corporate Vice President of Microsoft. She emphasizes the need for organizations, businesses, and individuals to tackle global challenges with proactive, “action-oriented optimism.” Only then does she believe we can start to solve problems that have so far felt unsolvable.
Others, like Annemarie Hou, Executive Director of the UN Office for Partnerships, share this hope. She sees promise in the business sector’s commitment to the Sustainable Development Goals at Davos as a testament. She remarks, "It's up to all of us right now, in the moment, to continue to push as far as we can and get the world as far as we can by 2030."
This conversation is presented by GZERO, in partnership with Microsoft, from the 2025 World Economic Forum in Davos, Switzerland. The Global Stage series convenes global leaders for critical conversations on the geopolitical and technological trends shaping our world.
Follow GZERO coverage of Davos here: https://www.gzeromedia.com/global-stage
Will Trumponomics cause a slowdown for the US economy?
Donald Trump’s economic agenda blends deregulation, anti-immigration policies, higher tariffs, and loose fiscal policy—an approach that "cuts in multiple different directions," says Jon Lieber during a GZERO livestream to discuss the 2025 Top Risks report. Lieber says deregulation could boost productivity, while measures like deportations and trade barriers risk straining industries reliant on foreign labor and open markets. With markets pricing in optimism but key sectors facing uncertainty, the impact of Trumponomics will hinge on how far the administration goes in implementing its campaign promises in 2025 and beyond.
Take a deep dive with the panel in our full discussion, livestreamed on Jan. 6 here.