“Liberation Day” just gave way to Capitulation Day.
US President Donald Trump pulled back on Wednesday on a series of harsh tariffs targeting friends and foes alike in an audacious bid to remake the global economic order.
Mr Trump’s early afternoon announcement followed a harrowing week in which Republican lawmakers and confidants privately warned him that the tariffs could wreck the economy.
His own aides had quietly raised alarms about the financial markets before he suspended a tariff regime that he had unveiled with a flourish just one week earlier in a Rose Garden ceremony.
Tariffs latest: Beijing takes fight to Trump
The stock market rose immediately after the about-face, ending days of losses that have forced older Americans who’ve been sinking their savings into 401(k)s to rethink their retirement plans.
Ahead of Mr Trump’s announcement, some of his advisers had been in a near panic about the bond markets, a senior administration official told Sky News’ US partner network NBC News.
Donald Trump’s tariffs crisis ‘likely’ to spark recession, says JPMorgan Chase CEO
US-China trade war ramps up: Who will blink first?
Is there method to the madness amid market chaos? Why Trump would have you believe so
Interest rates on 10-year Treasury bonds had been rising, contrary to what normally happens when stock prices fall and investors seek safety in treasuries.
The unusual dynamic meant that at the same time the tariffs could push up prices, people would be paying more to buy homes or pay off credit card debt because of higher interest rates. Businesses looking to expand would pay more for new loans.
Two of Mr Trump’s most senior advisers, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, presented a united front on Wednesday, urging him to suspend the tariffs in light of the bond market, the administration official said.
In a social media post, Mr Trump announced a 90-day pause that he said he’ll use to negotiate deals with dozens of countries that have expressed openness to revising trade terms that he contends exploit American businesses and workers.
One exception is China. Mr Trump upped the tariff on the country’s biggest geopolitical rival to 125%, part of a tit-for-tat escalation in an evolving trade war.
Mr Trump reversed course one week after he appeared in the Rose Garden and unveiled his plan to bring jobs back to the United States. Displaying a chart showing the new, elevated tariffs that countries would face, Mr Trump proclaimed: “My fellow Americans, this is Liberation Day.”
It proved short-lived. Markets plunged in anticipation of heightened trade wars, wiping out trillions of dollars in wealth.
Please use Chrome browser for a more accessible video player
Read more:
Donald Trump has finally blinked
What China could do next as Trump’s tariff war ramps up
Democrats seized on the issue, looking to undercut a source of Mr Trump’s popular appeal: the view that he can be trusted to steer the nation’s economy.
“Donald Trump’s market crash has vaporised a whopping $104,000 from the average retirement account,” Senate Minority Leader Chuck Schumer, said on Wednesday on the Senate floor, hours before the president’s reversal.
The episode laid bare the rifts within Mr Trump’s team of senior advisers as the White House struggled to offer a clear, consistent argument about the duration of the tariffs.
While Mr Bessent seemed open to negotiations, Peter Navarro, a senior trade adviser, appeared to take a more hard-line posture.
Elon Musk, the billionaire Tesla chief executive who has been advising Mr Trump on the government workforce, called Navarro “dumber than a sack of bricks,” while Mr Navarro described Mr Musk as someone who is merely “a car assembler, in many cases”.
Please use Chrome browser for a more accessible video player
But the weeklong drama also underscored the peril of a policymaking process that is often tied to the wishes and vagaries of one man: Donald Trump.
Asked about the dust-up between Mr Musk and Mr Navarro, Republican Senator Lindsey Graham, a golf partner of Mr Trump’s, said: “I don’t think it matters. The only one who matters is Trump.”
Markets tend to favour predictability, as do business leaders deciding where to build new plants. When Mr Trump sets a course, however, there are bound to be detours.
A friend of his who spoke to him in recent days said Mr Trump gave no sign he was about to “back down quickly on this stuff”.
Mr Trump believes other countries trade unfairly and sees tariffs as a tool to make the United States more competitive, the person said.
“He’s very confident it’s going to work for him,” the person added, speaking on condition of anonymity.
👉 Follow Trump 100 on your podcast app 👈
And yet in the run-up to Wednesday’s announcement, Mr Trump and his aides were also hearing from GOP lawmakers and outside allies urging an alternative path.
One was Larry Kudlow, who hosts a show on Fox Business Network and was a senior economic adviser in Mr Trump’s first term.
Mr Kudlow told NBC News that he has had “ongoing” talks with friends in the West Wing about the need to negotiate with other countries before the United States slaps them with tariffs that stand in perpetuity.
Describing Mr Trump’s move Wednesday as “fabulous,” Mr Kudlow added: “Dealmaking is the best thing to do. In the last 48 hours, Trump has gone from non-negotiating to negotiating.
“It’s very clear that Bessent is now the point man on trade. Very clear.”
Follow our channel and never miss an update.
Anxious GOP lawmakers also weighed in.
Mr Graham said he spoke to Mr Trump at length on Tuesday night and told him he had been hearing from car manufacturers who are worried about how the tariffs would affect their business. BMW operates a plant in Mr Graham’s home state and is one of the companies he said he had spoken to.
Senator John Kennedy, a Republican lawmaker who was also in touch with the administration, said on Tuesday that he planned to have lunch with Mr Bessent. On Wednesday, he told NBC News he was also talking to the White House.
Mr Kennedy likened Mr Trump to the “pit bull who caught the car”. Now, he said, the question becomes: “What are you going to do with the car?”
After more market losses this week, and with pressure mounting from Republicans on Capitol Hill, Mr Trump began having second thoughts.
In his first term, he often viewed the ups and downs of the stock market as a kind of report card on his presidency, celebrating its rise. The downturn had got his attention.
“People were getting a little queasy,” he acknowledged Wednesday on an event with NASCAR racing champions.
“Over the last few days” he began to more seriously consider pausing the additional tariffs, he told reporters later in the day in an Oval Office appearance.
Be the first to get Breaking News
Install the Sky News app for free
One prospect that intrigued him was personally negotiating new trade deals with the countries looking to get out from under the tariffs, the senior administration official said.
He’d made up his mind. Sitting with Mr Bessent and Mr Lutnick, he crafted the note announcing the 90-day postponement and ending, for the time being, the biggest economic crisis of his young presidency.
“We wrote it from our hearts, right?” Mr Trump said. “It was written as something that I think was very positive for the world and for us, and we don’t want to hurt countries that don’t need to be hurt, and they all want to negotiate.”
The day closed with the Dow Jones Industrial Average up nearly 8%, erasing some – but not all – of the “post-Liberation Day” losses.
Messy as it all may have seemed, his administration insisted that all is unfolding as planned.
“You have been watching the greatest economic master strategy from an American president in history,” White House deputy chief of staff Stephen Miller posted on Wednesday afternoon.
