The Trump Trade War: Reciprocal Tariffs and a 90-Day Truce

Written by Sol Han

Introduction 

2nd April 2025 marks what President Trump declared ‘Liberation Day’. On this date, he signed an Executive Order that instituted reciprocal tariffs on countries around the world in an effort to ‘make America wealthy again’. Describing the move as a long-overdue correction to what he sees as decades of one-sided trade, Donald Trump called it America’s ‘declaration of economic independence’. Invoking the International Emergency Economic Powers Act (IEEPA), Trump unilaterally imposed a 10% blanket tariff on all U.S. imports, alongside even steeper individualised tariffs on countries running the largest trade deficits with the United States, most notably China. 

The IEEPA, a 1977 law, gives the president broad authority to regulate commerce during a declared national emergency, including powers to freeze assets and impose economic sanctions. However, the legitimacy of President Trump’s use of this authority to introduce a broad tariff regime has already come under legal scrutiny. California Governor Gavin Newsom has filed a lawsuit to block the ‘unlawful’ order, arguing that only Congress has the constitutional power to levy such tolls. The White House dismissed the challenge, affirming that the administration ‘remains committed’ to the president’s new tariff policy.

At the heart of this policy are higher tariffs aimed at China, reflecting the longstanding tensions between the two nations over trade practices. President Trump has repeatedly criticised China for alleged intellectual property theft, forced technology transfers, and currency manipulation. By imposing steeper duties on Chinese goods, the administration aims to confront what it sees as a deeply unbalanced economic relationship that has invited retaliation and further escalation in what many are calling a renewed trade war.

Why is Trump Raising Tariffs?

Since China’s entry into the World Trade Organization in 2001, it pursued export-led growth and became a key link in global supply chains. It quickly became one of America’s largest trading partners, but also one of its most controversial. The U.S. has consistently run a large trade deficit with China, meaning it imports significantly more from China than it exports. In 2024 alone, this deficit stood at over $295.4 billion, which was a 5.8% increase from the year before.

A trade deficit isn’t inherently harmful. Political scientist Carla Norrlöf argues that the use of efficiently produced foreign-made intermediate goods enhances the productivity of US firms, and (as we will see later) the reliance of other countries on the large American market strengthens its leverage in trade negotiations. Nonetheless, Trump has adamantly framed the U.S. trade deficit against China as a sign that the country is being taken advantage of through ‘unfair’ trade practices. By hiking up the price of Chinese imports and encouraging domestic production, his goal is to close this gap and redirect wealth back into the American economy.

What is the U.S.-China Trade War and 90-Day Pause?

Trump’s second presidency reignited his protectionist agenda almost immediately upon his return to office. On 1st February, he announced a fresh 10% tariff on all Chinese imports, on top of tariffs from his first term and those carried over by the Biden administration. China swiftly retaliated with steep tariffs on U.S. energy and agricultural exports. A cycle of escalation followed: the U.S. raised tariffs again in March and April, reaching a cumulative 104% on Chinese goods. China responded in kind, imposing an 84% tariff burden on U.S. imports.

Then came a dramatic policy shift. On 9th April, during a congressional hearing, Trump unexpectedly announced a 90-day pause on planned tariff hikes for many of America’s trading partners. Countries that had not retaliated against earlier U.S. tariffs were granted a temporary reprieve, with tariffs capped at 10% until July, while they negotiated bilateral trade agreements. The move came amid market turmoil and mounting warnings of a global recession. Trump defended the pause by claiming, ‘We don’t want to hurt countries that don’t need to be hurt,’ and cited contact from ‘more than 75 countries’ eager to reach a deal.

The pause, however, did not extend to China. Beijing was hit with the full force of Trump’s sweeping regime, including a steep hike that totalled up to 145% on Chinese exports effective immediately. The administration made clear that its tough stance on China was non-negotiable, with Trump insisting that ‘the days of ripping off the U.S.A.’ were over.

The Aftermath So Far

Markets were thrown into turmoil in the immediate aftermath of Trump’s initial tariff announcement, with investors panic-selling amid fears of a full-scale trade war. However, the surprise 90-day pause sparked a turnaround; the Nasdaq Composite soared by 12.2% while the S&P 500 posted its largest one-day gain since 2008.

Yet, the broader picture remains fraught with uncertainty. China has since responded with its heaviest retaliation to date, slamming 125% tariffs on all U.S. imports and warning that U.S. goods may soon become commercially unviable in the Chinese market. Beijing also imposed new restrictions on Hollywood films and blacklisted 18 American companies, framing its requital as a final warning before seeking alternative countermeasures.

Across the Atlantic, EU member states approved retaliatory tariffs on up to $23 billion of U.S. goods, though Brussels has since paused its first wave of countermeasures following Trump’s tariff freeze. Even so, French president Emmanuel Macron called the pause ‘fragile’, cautioning that the next three months amount to ‘90 days of uncertainty’ for businesses worldwide.

With markets remaining volatile and major economies bracing for prolonged trade hostilities, Goldman Sachs has raised the probability of a U.S. recession to 45%. Meanwhile, researchers at Yale note that the U.S. is now operating under its highest average import duty rate in over a century.

Conclusion

What began as a push for ‘reciprocity’ has escalated into one of the most aggressive and unpredictable trade showdowns in modern history, leaving global supply chains, consumer prices, and international diplomacy hanging in the balance. Donald Trump’s return has revived the protectionism sought in his first term, except this time with fewer constraints and higher global stakes. As countries scramble for exemptions and brace for retaliation, the world now faces a test of economic endurance that could rival the drawn-out battles of a cold war.

Sources

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