The European Union has announced a 90-day suspension of its planned retaliatory tariffs on U.S. goods after President Donald Trump unexpectedly scaled back a new wave of tariffs, offering a temporary easing of rising global trade tensions.
The EU had prepared to impose €21 billion (approximately $23.25 billion) in counter-tariffs starting next Tuesday in response to Trump’s decision to enforce 25% tariffs on steel and aluminum imports. However, European Commission President Ursula von der Leyen confirmed on Thursday that these measures are now on hold.
“We want to give diplomacy a chance,” von der Leyen stated on social media. “While our Member States strongly supported the countermeasures, we’ve decided to pause them for 90 days to allow room for negotiations.”
Trump’s abrupt shift came on Wednesday, just hours after the new tariffs took effect, triggering a surge in global financial markets. U.S. stock indices climbed sharply, and the rally extended to European and Asian markets on Thursday. His decision followed a bout of financial market instability reminiscent of the early COVID-19 pandemic.
Despite this temporary relief, European officials warned that the suspension could be reversed if talks break down. “If negotiations fail to produce results, our countermeasures will be implemented. Preparations for additional steps are ongoing,” von der Leyen added.
The proposed EU tariffs were expected to hit a wide range of U.S. exports, including maize, wheat, motorcycles, poultry, fruits, and apparel. Those plans are now paused amid hopes for progress in renewed transatlantic trade discussions.
Nevertheless, the reprieve is only partial. The U.S. administration clarified that a 10% blanket duty on nearly all imports remains in place. Existing tariffs on steel, aluminum, and automobiles are still being enforced. Additionally, Canadian and Mexican goods continue to face a 25% fentanyl-linked tariff unless they comply with rules under the US-Mexico-Canada Agreement (USMCA).
Trade Tensions with China Escalate
While easing pressure on the EU, the U.S. has intensified its trade standoff with China. On Wednesday, Washington raised tariffs on Chinese goods from 104% to 125%. President Trump also signed an executive order targeting China’s dominance in global shipping, with aims to bolster domestic shipbuilding.
Beijing responded sharply. Chinese Commerce Ministry spokesperson He Yongqian warned that China would “see it through to the end” if the U.S. continued its current approach. “Dialogue is possible, but only with mutual respect,” the spokesperson said at a press conference.
China retaliated by imposing 84% tariffs on American imports and saw its currency, the yuan, fall to its lowest level against the dollar since the 2008 financial crisis.
Although Trump reiterated his belief that tariffs are necessary to correct trade imbalances, he acknowledged that a deal with China is still possible. U.S. officials, however, indicated a growing focus on trade talks with countries like Japan, Vietnam, and South Korea.
Cautious Optimism in Financial Markets
Trump’s shift in strategy sparked a wave of cautious optimism across markets. Eurozone bond yields rose, share prices rallied, and expectations of further rate cuts by the European Central Bank were tempered.
Still, concerns linger. ECB Governing Council member Francois Villeroy de Galhau described the development as “less bad,” but warned that continued unpredictability could erode confidence and hamper growth. “This pause is welcome, but volatility remains a serious concern,” he told French media.
Trump admitted that the negative reaction from financial markets played a role in his change of heart. His initial tariff announcement on April 2 triggered a sharp sell-off that wiped trillions from global markets and caused U.S. bond yields to spike.
Uncertain Path Ahead
While the temporary suspension of tariffs has eased fears of an immediate trade war, the longer-term outlook remains clouded. The EU emphasized that its countermeasures are only delayed—not withdrawn—pending the success of upcoming negotiations.
Meanwhile, Washington appears committed to maintaining pressure on China and selectively targeting other nations with trade restrictions. India has expressed interest in accelerating a trade agreement with the U.S., joining other countries seeking favorable terms amid rapidly evolving global trade dynamics.
