Top things you need to know about Trump’s 90-day tariff pause

Seven nerve-wracking days after imposing widely-criticized “reciprocal tariffs” on the world, US President Donald Trump has moved back on a big part of the worst of these tariffs. At the same time, he has increased retaliatory tariffs on China to 125%. The 90-day pause (with a 10% tariff in the meantime) is welcome relief for exporters who now have slightly fewer fires to fight, though the escalation with China complicates things.

The full note sent to clients includes a more detailed exploration of these questions. A few limited extracts of these are given below -

What does the 90-day pause include?

For countries that “have not retaliated” against the US (so far, seems to be almost all countries other than China), the US has announced the following –

1. A 90-day pause on the country-specific tariff rates announced on April 2nd

2. A 10% blanket reciprocal tariff on all applicable countries during the 90-day pause

So far, these have been the only specifics announced on the 90-day pause itself, but there is likely further detail upcoming. Trump has also indicated there might be company based exemptions on some or all tariffs as well.

So far, it also seems that specific sectoral tariffs will still go through at higher rates - such as those on steel, aluminum, vehicles, and recently signaled on pharmaceuticals.

What is the tariff increase on China and is there more to worry about?

Alongside the 90-day pause, the tit-for-tat escalation against China over the last few days has come up to the US putting a 125% tariff on Chinese exports into the US. More worryingly, there is some indication that the US is focusing the global trade war more squarely onto China.

Both Trump and his advisors have used significant language framing China as the “big problem” in global trade, especially as part of the shift towards the 90-day pause. Two key Trump cabinet members have inferred that a broader “coalition” against China might be part of the expected negotiations with other countries -

• Commerce Secretary Howard Lutnick has said that that “The world is ready to work with President Trump to fix global trade, and China has chosen the opposite direction.”

• Treasury Secretary Scott Bessent has said that Trump “goaded China into a bad position” and that “they [China] have shown themselves to the world to be the bad actors”.

This touches on the key imbalance this situation creates – tariffs on China are prohibitively high but the rest of the world has a relatively equal playing field now. Will there be large transshipment of goods from China to the US through other countries? Will the US find ways to avoid that from happening?

What’s next, what should you look out for, and why?

The immediate relief that this measure has given has led to massive recoveries in markets. However, the situation obviously remains highly volatile. There are a few factors we think clients should be watching out for –

1. What does the US hope to get out of the negotiations during this pause?

2. Will 10% tariffs still lead to a global slowdown or a recession?

3. Will other countries end up being pushed to put tariffs onto China?

4. Will China devalue the Yuan in response to this singled-out escalation?

5. How much will oil and global commodities recover?

6. Will global bond markets recover similarly to other assets?

Over the upcoming weeks, we will continue to cover these pain points especially with more specifics on impacts to exporters and other firms directly affected in the current world in transition.

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(Frontier Research is a Colombo-based firm that engages in macroeconomic research and advisory for corporate and investment clients on Sri Lanka, South Asia, and South East Asia.)

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