Reciprocal tariffs from the US went into effect yesterday, affecting many nations around the world. However, US President Donald Trump announced he would pause higher reciprocal tariffs for 90 days on several countries that had not retaliated against the US. This was welcome news for investors. However, trade tensions with China have escalated. President Trump said he would increase tariffs on Chinese goods. The world’s two largest economies have put massive tariffs on each other in recent days, neither willing to back down.

• After learning about the reciprocal tariffs, China retaliated by upping its tariff on US imports to 84%. On Monday, President Trump threatened to raise tariffs on China by another 50% if it didn’t remove its own planned duties against the US. China’s lawmakers said they wouldn’t back down. President Trump raised tariffs again yesterday to 125%.
• Higher reciprocal tariffs have been paused for 90 days. The reciprocal tariff will be 10% during this period, according to President Trump. This would ease the pressure on many nations that have already reached out and are looking to negotiate a trade deal.
• The tariffs could weigh on business activity, potentially hurting revenue and profits. Fitch Ratings says global trade tensions could raise credit risks. Fitch believes tariffs could lower revenue and profits, particularly in industries such as automotives and technology hardware, which have complex international supply chains.
• The pause on higher reciprocal tariffs eased investor concerns. Canada’s main index, the S&P/TSX Composite Index, rose over 5% yesterday. In the US, the S&P 500 Index increased almost 10%, while the technology-heavy NASDAQ Composite Index rose over 12%. This follows several days of relatively big losses.

The Canadian and global economies are expected to slow as US tariffs come into effect. The 90-day delay was welcome news, suggesting that President Trump is willing to negotiate with other countries to have tariffs removed. Canada is expected to speak with the US after the federal election. Despite the delay, tariffs persist, which could slow global economic activity.

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