Stocks stumbled from Trump’s reciprocal tariff pause high

·       Even at 10% basic universal tariff and 145% Chinese and 25% various sectoral tariffs, the weighted average US tariff would be around 27% vs 2.5% prior

·       This will eventually cause a high cost of living, higher inflation, higher unemployment and lower economic growth, causing an all-out stagflation, if not recession; Gold surged again

·       Trump is now trying to boost the morale of both Wall Street and Main Street with fresh tax cuts and fiscal stimulus worth $1.5 trillion over 10 years

·       Both the US and China are eager to negotiate but may be suffering from ego problems for dialing each other first

On early Wednesday, April 9, 2025, Wall Street Futures were almost flat on escalating trade war tensions amid higher tariffs and counter-tariffs between the two largest economies in the world and China. But Wall Street Futures also recovered from an earlier low caused by Chinese tit-for-tat tariff in response to Trump’s 50%; total cumulative reciprocal tariffs on each other is now around 104% since February 2025 under Trump 2.0. There were an additional 25% (approx) tariffs on various Chinese goods from 2018 to 2022, mostly under Trump 1.0 and also partly under Biden admin.

In early US Wednesday Wall Street Futures recovered after Trump virtually assured devastated and tensed Wall Street that some good news may be coming and thus traders should now buy the market or take long positions in indices like DJT (DJ-30).

On Wednesday, Trump said:

·       This is a great time for firms to move to the US

·       Republicans in House must pass Tax Cut Bill

·       Productive call with Japan's Prime Minister this morning

·       This is a GREAT time to move your COMPANY into the United States of America, like Apple, and so many others, in record numbers, are doing. ZERO TARIFFS, and almost immediate Electrical/Energy hookups and approvals. No Environmental Delays. DON’T WAIT, DO IT NOW!

·       MAKE AMERICA GREAT AGAIN!

·       Republicans, it is more important now, than ever, that we pass THE ONE, BIG, BEAUTIFUL BILL. The USA will Soar like never before!!!

·       Republicans in the House must pass the Tax Cut Bill, NOW! Our Country Will Boom!!!

·       “Fixing Trade and Tariffs is a good thing!” Jamie Dimon, JPMorgan Chase, Chairman & CEO, on Maria B Show!

·       BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!

·       THIS IS A GREAT TIME TO BUY!!! DJT

On late Wednesday, Trump again Truthed (posted in his Truth handle):

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully shortly, China will realize that the days of ripping off the U.S.A., and other Countries, are no longer sustainable or acceptable.

Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non-Monetary Tariffs and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, 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!”

As highly expected, Trump postponed the implementation of reciprocal (ad-valorem) tariffs by 90 days except China as over 75 other countries all over the world have called the White House, requesting for a negotiation. Subsequently, stock futures on both sides of the Atlantic and even the Pacific soared except China. Gold briefly slid as USD/US bond yield surged on temporary tariff relief and fading concern of an all-out stagflation or even a recession in the US.

But Gold again surged early Asian Thursday, April 10, 2025, and USD, Wall Street Futures slid as even a 10% basic universal tariff on all US merchandise imports is still meaningfully higher than earlier 2.5% tariffs. The weighted average of Trump’s ad-valorem reciprocal tariffs would be around 27.5%; if implemented at face value or as published on the so-called Tariff Liberation Day on April 2, 2025. Again if we consider theoretically 125% tariffs on Chinese exported goods into the US, consisting of almost 15% of total US merchandise imports and 10% universal basic tariffs on the rest 85% imported goods, weighted average tariffs would be around 27.2% against 2.5% earlier, which would be significantly higher than pre-reciprocal tariffs era of 2.5% on an average. This excludes 25% metal tariffs and 25% auto tariffs. The temporary pause maintains a general 10% tariff on imports and excludes goods from Mexico and Canada covered under the USMCA.

On late Wednesday, Trump also boasted about the epic Wall Street rally and Truthed:

·       What a day, but more great days coming!!!

Trump excluded China as China didn’t bother to call him/White House and retaliated against Trump’s warning, Trump also excluded China for this temporary 90-day relief of reciprocal tariffs implementation and imposed an additional 41% tariffs on top of existing 84% on Chinese goods imported into the US, totaling 125% since February 2025 under his 2nd term.

This is in addition to prior 25% tariffs on Chinese goods since 2018, mostly under Trump 1.0 and partly under the Biden admin. Thus cumulative Trump tariffs on Chinese consumer and industrial goods are now almost 150% since 2018, the start of Trump's trade war policy.

Trump also ‘punished’ China for its effort to form an anti-tariff group/alliance with Japan, South Korea, India, the EU and various other countries including Canada. Trump rewarded almost all other countries except China for begging for relief, not opting for any retaliation and also not trying to form any alliance against the United States of America, the number one superpower in the world. Trump admin will now try to negotiate within this short period of 90 days about not only tariff barriers but also other non-tariff & non-monetary barriers like significant local direct/indirect sales taxes (VAT.GSTs etc), targeted regulations, state industrial/agri subsidy policies and even alleged currency manipulation, effectively making exports to the US cheaper and exports from the US costlier.

In short, Trump not only wants a universal minimum global tariff of 10% or country-specific minimum tariff of around 10% to be applied to each other but also lower or nil local sales taxes, free & fair access to export markets for US goods without any targeted regulations and also no currency manipulation coupled with modification in state subsidy, encouraging manufacturing and export. Trump wants to change the internal system of other countries, so that US goods can compete globally, including China.

In his 1st term, Trump also wanted to change China, and its SOE policies and launched a tech and cold war in addition to a trade war. At one point in time, Trump even threatened to terminate all types of relations with China. But China didn’t succumb despite intense Trump pressure and bullying tactics. China fought Trump, engaging in marathon negotiations for 2-years and then signed Trade Deal 1.0 in early 2020, just before COVID.

On April 9, 2025, President Trump announced a significant 360-degree shift in his tariff strategy. Initially, he had imposed a universal 10% tariff on nearly all U.S. imports, with additional "reciprocal" tariffs ranging from 10% to 49% on almost 80 countries worldwide effective midnight on April 9. These reciprocal tariffs were designed to match or exceed trade barriers imposed by other nations on U.S. goods.

However, following intense market volatility and global backlash, Trump reversed course later that day. He authorized a 90-day pause on the higher reciprocal tariffs for most countries, reducing them to a uniform 10% rate during this period, while simultaneously escalating tariffs on Chinese imports to 125%, effective immediately. This decision came after more than 75 countries allegedly reached out to negotiate with U.S. officials, refraining from immediate retaliation at Trump’s urging, while China responded with its retaliatory measures.

Trump justified the retaliatory tariffs pause by noting that countries willing to negotiate without retaliating deserved a reprieve, stating on Truth Social that the pause and lowered 10% rate were "effective immediately" for those nations. He singled out China for its "lack of respect" toward global markets, citing its retaliatory actions as the reason for the sharp tariff hike to 125%.

The US Treasury Secretary Scott Bessent described the move as a strategic play, suggesting Trump had "goaded China into a bad position" by isolating it while offering others a chance to negotiate. The White House clarified that the 90-day pause applies only to the additional reciprocal tariffs, not the baseline 10% universal tariff, which remains in place for all imports except those from China, now facing a higher rate.

On late Wednesday, Trump said:

·       I put a pause because people were jumping out of line

·       I have reversed tariffs for a short period

·       Nothing's over yet

·       China wants to make a deal but doesn't know how to go about it. China’s President Xi is a proud man. China is in the process of figuring it out.

·       We have many other countries wanting to come here

·       Trump reiterates 90-day pause on non-retaliating countries

·       A deal could be struck with China

·       Trump, asked on EU deal: A deal could be made with everyone, will be fair deals for everyone.

·       It is working out maybe faster than I thought

·       Apple building in China is unsustainable

·       Car manufacturers are coming to the US because of tariffs

·       I was watching the bond market

·       People last night were getting queasy

·       China wants to make a deal, they just don't know how to go about it

·       I am using instinct on such decisions, you have to have flexibility

·       I will take a look at exempting some US companies as time goes by

·       Have a good day on the stock market.

·       The record day on the stock market should continue

·       We will launch a review of existing procurement programs

·       I am glad the EU held back tariffs

·       US Commerce Secretary Lutnick: The US expects the EU will delay planned tariff retaliation

·       A lot of time, it's not a negotiation until it is

·       I would talk or meet with China’s President Xi

·       I respect very much President Xi; he is a fine man, very smart, and loves his country.

·       For decades after decades, China and also many other countries tipped off the US on trade, but I don’t blame China; my predictors even before Biden and Obama are responsible for this to allow it to happen; I don’t know if there was any corruption angle.

·       WTO is created by China and is a puppet of China

·       If China is a developing nation, so we are too

·       Sectoral tariffs are still coming

·       I am going to put tariffs on pharma companies

·       I don't want the US Steel company to go to Japan

·       We love Japan, but US Steel is a very special company

·       I have been thinking about a pause on tariffs for the past few days

·       A decision to pause tariffs came together this morning

·       I didn't know the tariff pause would have that impact on Wall Street

·       Trump reiterates Iran can't have a nuclear weapon

·       Trump reiterates Iran can't have a nuclear weapon

·       Russia and Ukraine need to make a deal

·       If it requires military, we're going to have military. Israel will be involved in that.

·       I'm not concerned about escalation with China

·       Trump on plans to meet with Putin: At some point

·       I can't imagine a further increase in tariffs on China

·       Markets right now are extremely good.

Overall, Trump is eager to have a trade negotiation with China for a phase two deal. And he blamed his predecessor for China’s rise as the global manufacturing giant, replacing the US.

But China’s reaction has been defiant so far, although they are also open for dialogues without the Trump gun at the forehead. On April 9, Beijing retaliated against the initial U.S. tariffs by imposing 84% tariffs on all U.S. goods, up from a previous 34% retaliatory rate announced earlier in the week. China’s Commerce Ministry condemned Trump’s policies as "unilateral bullying" and vowed to "fight to the end," rejecting pressure and threats as a means of engagement. The ministry urged the U.S. to cancel its tariffs and resolve disputes through dialogue, while hinting at further countermeasures, such as regulatory prohibition or rare earth export restrictions.

Chinese state media, like Xinhua, accused Trump of "naked extortion," and public sentiment on social platforms highlighted historical U.S. criticism of tariffs, referencing a 1987 Ronald Reagan speech. China has also issued travel advisories warning its citizens against visiting the U.S.

China responded assertively to the increased tariffs. The Chinese Embassy in the U.S. reiterated Beijing's commitment to "fight till the end" in response to the tariff hikes. Beijing has retaliated with levies of up to 15% on a wide range of key U.S. farm products, including chicken, pork, soy, and beef. Additionally, China placed 10 more U.S. companies on its unreliable entity list, barring them from engaging in China-related import or export activities and making new investments in the U.S.

On Thursday, April 10, 2025, China Commerce Ministry said;

·       Challenges facing China's foreign trade have increased significantly

·       China to support foreign companies to increase domestic sales

·       The door is open, but dialogue must be based on mutual respect and equality

·       We hope the US and China side will act in the spirit of mutual respect, peaceful coexistence, win-win cooperation

·       We will never accept extreme pressure or bullying from the US

·       If the US insists on its way, China will follow it to the end

·       China has taken and will continue to take, resolute countermeasures to safeguard its sovereignty, security, and development interests

·       China’s position on trade is clear and consistent

·       China reaffirms to continue taking resolute countermeasures to safeguard its interests.

·       China and the EU Signal Possibility for Closer Trade Relations

Other countries have responded with a mix of relief, caution, and strategic planning:

The European Union, initially facing a 20% reciprocal tariff, welcomed the pause, though it had voted on April 9 to prepare retaliatory duties (set to take effect later April 15) if negotiations failed. EU leaders, such as France’s President Macron and the UK’s PM Starmer, emphasized coordination to address the broader tariff threat.

On Thursday, EC President von der Leyen (VDL) said:

·       EU agrees on a 90-day pause in countermeasures due on April 15th against US tariffs, if negotiations are not satisfactory our countermeasures will kick in

·       EU remains committed to constructive talks with the US on tariffs

·       We want to give negotiations a chance

·       All options remain on the table

·       Preparatory work for further countermeasures continues

·       EU Commission Spokesperson: The EU is saying to the US "We are ready to make deals, let's talk"

Canada’s PM Carney called the pause a "welcome reprieve for the global economy," while maintaining vigilance over the 25% tariffs still applied to non-USMCA goods and 10% on energy products. Australia’s PM Anthony Albanese, facing a 10% tariff, ruled out retaliation and focused on negotiation, announcing a $50 million aid package for affected industries like beef exports. Brazil, also hit with a 10% tariff, passed a reciprocity law but leaned toward WTO appeals rather than immediate counter-tariffs. Vietnam and Taiwan expressed willingness to negotiate, with Taiwan’s President Lai Ching-te proposing a zero-tariff deal.

In India, the government reacted cautiously to Trump's announcement of reciprocal tariffs. New Delhi indicated its intention to deepen trade ties with the U.S., including reducing tariff and non-tariff barriers under a bilateral trade agreement. Commerce Minister Piyush Goyal engaged in discussions with U.S. counterparts to advance negotiations on a multi-sector bilateral trade pact, aiming to strengthen two-way trade and increase market access.

Globally, markets surged after the announcement, with the S&P 500 rising 9.5%, the Nasdaq up 12.2%, and the Dow gaining nearly 3,000 points on April 9—their best days in years—reflecting relief over the de-escalation outside China. European markets responded positively, with major indexes such as the export-heavy German DAX and French CAC 40 rising around 7%. Tesla's stock notably soared 18%, though ongoing tensions with China and automobile tariffs may still pose challenges for the company.

However, economists warn that the underlying 10% universal tariff and the escalating U.S.-China trade war could still push the U.S. toward recession, with Goldman Sachs estimating a 45% chance within 12 months. Trump’s allies, including Bessent and Commerce Secretary Howard Lutnick, frame the pause as a tactical success, opening doors for bespoke trade deals, while critics argue it reflects inconsistency and economic pressure from initial missteps.

Despite the temporary relief provided by the tariff pause, experts warn that the unpredictability of U.S. trade policies under the Trump administration continues to pose risks to global economic stability. The administration's approach has been criticized for its incoherence and impulsiveness, with concerns that the chaos is far from over as the U.S. enters a period of uncertain bilateral negotiations.

The situation remains fluid, with the 90-day window now a critical period for negotiations. The market is quite skeptical of a successful negotiation in this short time frame unless other countries readily agree to give significant concessions to Trump both in tariffs and non-tariff alleged barriers. Trump may also postpone the implementation of reciprocal tariffs to December 2025 or even forever as he intends to start the negotiation process for tariffs and other related reforms on a global scale. This decision was met with varied reactions globally. European Commission President Ursula von der Leyen welcomed the pause as a critical step toward global economic stability. The sudden swing in U.S. trade policy has created uncertainty globally, with many countries, businesses, and investors trying to understand the implications.

Trump is now trying to divert the attention of the market from tariffs to tax cuts. On early US Thursday, Trump Truthed:

“Great News! “The Big, Beautiful Bill” is coming along really well. Republicans are working together nicely. Biggest Tax Cuts in USA History!!! Getting close. DJT”

Punchbowl Reporter on X: “We expect a US House Speaker Johnson and Senate Republican Leader Thune presser this morning in which they say they are committed to finding $1.5T in tax cuts”

On Thursday, the White House Senior Adviser Hassett said:

·       I was on a call with Trump and the Swiss president yesterday

·       Two trade deals are almost closed as of last week

·       There's a big inventory of deals that are right close to the finish line

·       The bond market may have contributed to the tariff decision but did not cause a panic move

·       We have set up a process so that tariff deals can be orderly

·       The deal schedule is very doable

·       Conversations on China have not begun yet

·       Tariff revenue is expected to help reduce the deficit and help bond markets

·       Asked if tariffs are a permanent situation: Everyone expects 10% tariffs to be the baseline

·       The bond market may have contributed to the tariff pause decision

·       I will present a list of deal priorities to Trump today

·       I expect a lot of movement with world leaders in next 3-4 weeks

·       Trump never had any other intent than getting people to the table

·       Asked if Trump was trying to control the markets: Trump believes in the future of America

Overall, Trump scaled back his reciprocal tariff policies, because:

·       It was intended to create a big disruption to force all major global trading partners to scramble to trade & tariff negotiation with Trump admin/US

·       But China spoiled Trump’s plan by starting to take retaliation after retaliation, causing the capitulation of both Wall Street and Main Street.

·       The stock and also the bond market disruption forced the Trump admin to dial back their reciprocal tariffs narrative just a few hours before the actual implementation.

·       Also, the cost of living expenses would soar if Trump’s reciprocal tariffs were implemented at face value and allowed to stay there for long, which will inevitably affect US discretionary consumer spending, causing higher inflation, high unemployment and lower economic growth.

·       Intense protest in Main Street for Trump’s bellicose tariff policies

·       Even some prominent Republican Leaders are voicing protest openly against Trump’s policy amid intense public protest all over the US

·       Some Republican Leaders may even vote against Trump’s tax cut plan if Trump doesn’t postpone his reciprocal tariff policies

Conclusions

Trump wants not only equivalent universal tariffs and VAT/GST (goods & service tax) on US goods or overall global trade, but also seeking free & fair access to foreign markets irrespective of developing or developed economies/countries. Trump is furious with China as President Xi or any other senior official didn’t care to call him, begging for negotiation even under Trump’s pressure and blackmailing (bellicose dealing) strategy.

China, on its part, is not ready for such a deal (TikTok for some discount in tariffs). China and its top political leadership do not like Trump’s pressure and negotiation tactics using trade, tech, and also Cold War as a weapon. And also due to domestic political compulsion, Chinese top leadership will never make any trade deal under Trump's pressure. China also knows that Trump will soon blink as Wall Street is capitulating and Real Street is voicing increasing protest (Hands Up rallies across the US) for his bellicose policies, especially regarding trade & tariffs.

China will never allow TikTok or something other as a bargaining chip for a trade deal with the US/Trump. China already signed a trade deal with the US under Trump 1.0 after two years of marathon negotiation just before COVID. Although Trump is now again trying to seal another China trade deal 2.0, China is not ready to succumb easily as it has diversified its export/trade significantly beyond the US and EU to Africa, Southeast Asia, and also Eurasia. China is not ready to succumb to Trump’s pressure, but has a "willingness to have serious talks" to resolve the trade dispute and suggested US/Trump admin should show "equality, respect and reciprocity" toward Beijing.

Trump is under huge pressure and also looking & sounding stressed amid the capitulation of Wall Street and Main Street. There are intense ‘Hands Up’ protests across America by Democrat supporters and also neutrals/general public. Even various prominent Republican Leaders & Senators are now openly voicing concern against Trump’s bellicose tariff policies. The public is scrambling to buy various goods for day-to-day life to beat Trump tariffs as all these tariffs will be eventually borne by US importers, producers, retailers, and ultimately consumers. This will inevitably affect US discretionary consumer spending, private CAPEX (investment), and economic growth. The US economy may be heading for a stagflation.

Trump is trying to reduce or balance the huge US merchandise trade deficit by imposing draconian tariffs on other countries and forcing manufacturers into the US. But to become a major global/local manufacturing hub and to compete with China, Trump needs China like manufacturing and logistical infra, which the US does not have at present and it will take substantial time, effort, and also investment to do that. Almost all of Trump’s $5 trillion private CAPEX is in the initial MOU stage. Private businesses are also worried about Trump policy uncertainty and thus becoming cautious in fresh CAPEX and hiring. Trump admin is now divided over Trump’s tariff policies as Tesla CEO Musk is also now criticizing it and termed White House Trade advisor Navarro as a ‘moron’.

Trump is now trying to isolate China on tariffs and trade issues, but in the process, Trump may be isolating the US on globalization and trade. Various countries not so friendly with China, like Japan, South Korea, and even India are now joining hands with China for trade, development, and prosperity rather than never-ending US hegemony. Trump has to compete with China by creating a comparable manufacturing and logistical ecosystem/infra, not by simply imposing tariffs after tariffs.

Thus Trump is now trying for a face-saving exit and may propose reciprocal tariffs (ad-valorem import duties) by 90 days without China as almost all other countries have called him except China. But before doing that, Trump may also call his close Friend Chinese President Xi, and offer a truce rather than a never-ending trade war, in which there is no winning side. Trump may also try to boost the morale of Wall Street and Real Street with his tax cut policy to neutralize tariff impact to some extent.

The US importers may have already stocked or ordered goods from China and other affected countries well in advance to beat Trump tariff uncertainty.  But now, even at a 10% universal basic tariff, the US may give the highest tariff among developed nations. This 10% basic tariff is also meaningfully higher than the earlier 2.5%, And if we consider various sectoral tariffs like 25% on metals and automobiles and 125% on Chinese goods, almost 15% of US imports –the overall tariff may be around 27%, which is still substantially higher than 2.5%. Thus the concern of Trumpcession remains and Wall Street may again come under stress.

Bottom line

Trump’s comments about keeping patience amid Wall Street turmoil and urging traders/investors to buy DJT (DJ-30) along with the overall Chinese tone indicate back-channel negotiations between the two largest economies in the world, controlling almost 45% of global nominal GDP. The US and China may soon reach out to each other and call to resolve this trade issue. Trump may be also trying to force Fed rate cuts and lower YS bond yields with his bellicose trade war policies so that the overall cost of borrowing for the $40 trillion US public debt comes down considerably; it may be also YCC long with CCC (China Curve Control policy). Now the US, China, and even many other countries are preparing for both monetary and fiscal stimulus to fight an all-out trade war; if this happens, it may cause another wave of global inflation down the line and even a synchronized global Trumpcession.

Market impact:

On early Thursday, Wall Street Futures stumbled as China remained defiant and promised more retaliatory measures against Trump’s bellicose tariff policies. Although both the US and China are open to talks, both are also suffering from ego problems to dual each other first. China does not like Trump’s pressure tactics even before starting any official negotiations.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 38900) now has to sustain over 39500 for a further recovery to 39800/40000-40200/40700 and further rally towards 4100/41500-41700/42000 and 42700/42900-43200/43500 and 43700/44050 and 44250/44400-44500/44800 and 45000/45200-45300/45500 and even 45700/45800-45900/46000 in the coming days; otherwise sustaining below 39450, DJ-30 may again fall to 39100/38700-38000/36500-36200/33100 in the coming days.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 38900) now has to sustain over 39500 for a further recovery to 39800/40000-40200/40700 and further rally towards 4100/41500-41700/42000 and 42700/42900-43200/43500 and 43700/44050 and 44250/44400-44500/44800 and 45000/45200-45300/45500 and even 45700/45800-45900/46000 in the coming days; otherwise sustaining below 39450, DJ-30 may again fall to 39100/38700-38000/36500-36200/33100 in the coming days.

Similarly, NQ-100 Future (17800) has to sustain over 18500 for a further rally to 19000/19500-20000/20900 and 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 18400, NQ-100 may again fall to 18100/15800-14100/13600 in the coming days.

Also, technically Gold (CMP: 3000) has to sustain over 3025 for a further rally to 3055/3075-3100/3150 and 3175/3186*-3200/3225; otherwise sustaining below 3015, Gold may again fall to 2990 and 2965/2955-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.