In the latest plot twist on the international trade front, President Donald Trump announced on social media that he has issued a 90-day pause on higher tariffs for countries agreeing to negotiate with the United States, but raised tariffs on the one nation that has resisted — China.
The news sent the Dow Jones Industrial Average soaring by 2,500 points, ending a near weeklong slide toward a bear market.
Prior to the about-face, investors talked of a bear market, resurgent inflation, global recession and, more encouragingly, ramped up trade negotiations. Those who came forward to express interest in negotiating lower tariffs and perhaps addressing other trade barriers have been rewarded by the pause, while China appears to be isolated.
Ahead of this development, investors were fearful that added taxes on imported goods will be passed on to consumers, retaliatory tariffs will cripple exports, and the combination of both will devastate the global economy, which was showing signs of a slowdown before higher tariffs.
They have watched several days of market drops in excess of 1,000 points on the Dow, which were interrupted only by Monday’s 350-point drop, the Nasdaq’s bounce back, and Tuesday morning’s 1,300 point rally in the Dow futures market.
After Tuesday’s midnight deadline passed for China to reduce its retaliatory tariffs, it responded by raising its tariffs on U.S. goods to 84%, sending the Dow futures market down more than 700 points by 8 a.m. Eastern Standard Time on Wednesday.
Trump’s decision to pause the tariff increases opens a 90-day window for the U.S. and its trading partners to negotiate and avoid an economically devastating trade war. It also ratchets up the pressure on China to come to the table with the U.S.
Tariff blitz
On April 2, Trump declared a 10% baseline tax on imports from all countries and higher tariff rates on nations that run trade surpluses with the United States. The tariffs are designed to help manufacturers, which employ one in five Wisconsin residents. Based on 2024 trade activity, they have the most to lose from any trade war that fails to reset America’s trade relationships in their favor.
According to the Wisconsin Economic Development Corp., Wisconsin exported $27.5 billion in goods last year, led by industrial machines, $7.8 billion; electrical machines, $3.1 billion; medical and scientific instruments, $2.2 billion; non-rail vehicles and parts, $1.7 billion; and plastics, $1.6 billion.
In 2024, the top destinations for Wisconsin goods were: Canada, $7.9 billion; Mexico, $4.4 billion; China, $1.6 billion; Germany, $1.1 billion; and Australia, $807 million.
Kurt Bauer, president and CEO of Wisconsin Manufacturers & Commerce, the state chamber of commerce, said WMC surveyed its membership in December before the specifics on the tariff were known. He said there was support for “tariffing” China, but concerns about Canada and Mexico. “Keep in mind that those three countries constitute Wisconsin’s top three trading partners — Canada, Mexico and China,” he said.
Bauer said WMC won’t survey again until May and will have a better sense then on how its membership is reacting and how the tariffs are affecting profitability, supply chains, market access and other concerns. However, he talks with WMC members daily and the organization held a roundtable in Racine last week, where sentiment was mixed.
“Just under half of the manufacturers attending that event said they support the tariffs, either because they think tariffs will level-set trade relations with nations who are taking advantage of us, or they see a market opportunity — a chance to win business from a foreign competitor,” Bauer said. “Still, most businesses attending the roundtable oppose the tariffs because of the disruption and confusion they cause.”
One silver lining, according to the Trump administration, is that roughly 70 countries have come forward to express their interest in new trade deals. “Virtually every country wants to negotiate,” Trump said during an Oval Office press conference Monday alongside Israeli Prime Minister Benjamin Netanyahu, who is negotiating his country’s own deal with the Trump administration.
Netanyahu sent conciliatory signals on trade. “We will eliminate the trade deficit with the United States,” he said. “We intend to do it very quickly. We think it’s the right thing to do and we’re going to also eliminate trade barriers … and I think Israel can serve as a model for other countries who ought to do the same.”
The nations that have signaled a willingness to deal also include Canada and Mexico, but one country taking a hard-line stance is China, which responded with retaliatory tariffs on all U.S. imports. On Monday, Trump threatened additional 50% tariffs on China if China does not rescind its retaliatory duties, and the Chinese commerce ministry responded by vowing to “fight until the end.” When China failed to respond by Tuesday’s midday deadline, the administration announced the additional 50% would be applied, meaning the total tariff on China’s goods stands at 104%. Rather than caving, China then responded with its 84% tariff on U.S. goods.
Complicating the negotiations is that tariffs placed on U.S. exports aren’t the Trump administration’s only beef with foreign trading partners. Administration spokesmen, most notably trade adviser Peter Navarro, also cite non-tariff trade barriers such as product dumping, currency devaluation, export subsidies and limits on U.S. imports as practices that must end.
How WMC’s members will react to the volatility depends on a variety of factors, Bauer said, including what product or service they sell, which market they sell it in, and what their supply chain looks like. He said businesspeople have known since Trump won the election last November that tariffs were coming and there would be some disruptions.
“There is at least a little more certainty now that the tariffs have been implemented,” Bauer said before the tariffs were paused. “Now businesses can execute mitigation strategies, which many had ready to go. Remember, businesses experienced similar disruption to supply chains and markets during COVID-19.”
Still, many manufacturers will find it challenging to source domestic alternatives for parts, components and raw materials.
“In some cases, domestic sources don’t exist and may have to be created, which takes time and investment,” Bauer said.
Rough ride
Meanwhile, market turbulence was the immediate focus of investors, not the potential long-term benefits of resetting the global economy. Entering Tuesday, April 8, the nation was on the cusp of a bear market, which is when an index such as the S&P 500 or the Dow Jones Industrial Average falls 20% or more from its recent high for a sustained period of time. On Monday afternoon, the S&P 500 was down 18.4% from its all-time high on Feb. 19, before Tuesday’s brief rally began.
From the U.S. perspective, if more favorable trade deals can be negotiated in short order, the market slump could be short-lived. The last bear market happened amid the inflationary fears of 2022, but that was not as sharp a decline as the 34% drop in the S&P 500 during the first month of the COVID-19 pandemic in March 2020.
Before the pause on tariffs, financial managers were busy trying to calm jittery clients. Matt Rice, chief investment officer for First Business Bank Private Wealth Services, said his feelings are similar to those he had during the start of the pandemic in March 2020.
“Just like at that time, we prepared clients for rebalancing their portfolios,” he said, referring to the practice of selling 5% bonds and rebuying 5% stocks to maximize risk-adjusted returns over time.
“The U.S. economy, the global economy, is resilient and strong,” Rice said. “There’s a period of market adjustment, but people who are rebalancing portfolios today, people that are buying stocks today, have a much higher probability of being in a better shape a year from now than folks who are selling stocks today.”
Editor’s note: This is an update to an earlier story titled, “Trump’s tariffs roil markets and economies.”
