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Trump U-turns on tariffs but keeps trade war heat on China

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U.S. President Donald Trump’s stunning decision to pause the hefty duties he had just imposed on dozens of countries sent battered global stock markets surging on Thursday even as he ratcheted up a trade war with the world’s No. 2 economy China.

Trump’s turnabout on Wednesday, which came less than 24 hours after steep new tariffs kicked in on most trading partners, followed the most intense episode of financial market volatility since the early days of the COVID-19 pandemic, Reuters reported.

The upheaval erased trillions of dollars from stock markets and led to an unsettling surge in U.S. government bond yields that appeared to catch Trump’s attention.

“I thought that people were jumping a little bit out of line, they were getting yippy, you know,” Trump told reporters after the announcement, referring to jitters sportpeople sometimes get.

U.S. stock indexes shot higher on the news, with the benchmark S&P 500 index closing 9.5% higher. Bond yields came off earlier highs and the dollar rebounded against safe-haven currencies.

The relief spread through Asian markets as they opened on Thursday with Japan’s Nikkei index surging 8% while European futures also pointed to a sharp rebound. Even Chinese stocks rose, propped up by hopes of state support, although its yuan currency fell to the lowest level since the global financial crisis.

Since returning to the White House in January, Trump has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute. The on-again, off-again approach has baffled world leaders and spooked business executives.

U.S. Treasury Secretary Scott Bessent asserted that the pullback had been the plan all along to bring countries to the bargaining table. Trump, though, later indicated that the near-panic in markets that had unfolded since his April 2 announcements had factored in to his thinking.

Despite insisting for days that his policies would never change, he told reporters on Wednesday: “You have to be flexible.”

But he kept the pressure on China, the second biggest provider of U.S. imports. Trump said he would raise the tariff on Chinese imports to 125% immediately from the 104% level that took effect at midnight.

Beijing on Wednesday slapped 84% tariffs on U.S. imports to match Trump’s earlier tariff salvo and has vowed to “fight to the end” in an escalating tit-for-tat trade dispute between the world’s top two economies.

Chinese companies that sell products on Amazon are preparing to hike prices for the U.S. or quit that market due to the “unprecedented blow” from the tariff hikes, the head of China’s largest e-commerce association said.

‘GOADED CHINA’

Trump’s reversal on the tariffs imposed on other countries is also not absolute. A 10% blanket duty on almost all U.S. imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminum that are already in place.

The 90-day freeze also does not apply to duties paid by Canada and Mexico, because their goods are still subject to 25% fentanyl-related tariffs if they do not comply with the U.S.-Mexico-Canada trade agreement’s rules of origin. Those duties remain in place for the moment, with an indefinite exemption for USMCA-compliant goods.

Trump’s tariffs had sparked a days-long selloff that erased trillions of dollars from global stocks and pressured U.S. Treasury bonds and the dollar, which form the backbone of the global financial system. Canada and Japan said they would step in to provide stability if needed – a task usually performed by the United States during times of economic crisis.

Analysts said the sudden spike in share prices might not undo all of the damage. Surveys have found slowing business investment and household spending due to worries about the impact of the tariffs, and a Reuters/Ipsos survey found that three out of four Americans expect prices to increase in the months ahead.

Goldman Sachs cut its probability of a recession back to 45% after Trump’s move, down from 65%, saying the tariffs left in place were still likely to result in a 15% increase in the overall tariff rate.

Treasury Secretary Bessent shrugged off questions about market turmoil and said the abrupt reversal rewarded countries that had heeded Trump’s advice to refrain from retaliation. He suggested Trump had used the tariffs to create maximum negotiating leverage. “This was his strategy all along,” Bessent told reporters. “And you might even say that he goaded China into a bad position.”

Bessent is the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters. Trump has spoken with leaders of Japan and South Korea, and a delegation from Vietnam met with U.S. officials on Wednesday to discuss trade matters, the White House said.

Bessent declined to say how long negotiations with the more than 75 countries that have reached out might take.

Trump said a resolution with China was possible as well. But officials have said they will prioritize talks with other countries.

“China wants to make a deal,” Trump said. “They just don’t know how quite to go about it.”

Trump told reporters that he had been considering a pause for several days. On Monday, the White House denounced a report that the administration was considering such a move, calling it “fake news.”

Earlier on Wednesday, before the announcement, Trump tried to reassure investors, posting on his Truth Social account, “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!”

Later, he added: “THIS IS A GREAT TIME TO BUY!!!”

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Trump says further US attacks on Iran ‘highly unlikely’ as peace talks gain momentum

Although Trump played down the prospect of renewed attacks, he warned that US forces remained prepared to respond if circumstances changed.

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US President Donald Trump has said further American military strikes against Iran are “highly unlikely”, signalling a possible shift towards de-escalation as diplomatic efforts to end the conflict gather momentum.

Speaking to reporters at the White House on Monday, Trump said Iran was effectively defeated militarily and suggested Washington was prepared to maintain the current situation while negotiations continued.

“Iran militarily is effectively over,” Trump said, adding that there was “positive momentum” behind efforts to reach an agreement.

“We’re just keeping it the status quo,” he said, explaining that the decision was largely being taken at the request of neighbouring countries.

Although Trump played down the prospect of renewed attacks, he warned that US forces remained prepared to respond if circumstances changed.

“We’re locked and loaded,” he said, while describing further strikes as “highly unlikely”.

The comments come amid growing pressure on the Trump administration to bring the conflict to an end, following bruising midterm election results for Republicans last week. 

Several senior party figures, including Vice-President JD Vance, have pointed to the war as a factor behind the party’s poor performance.

Trump had previously indicated that US forces carried out what he described as limited strikes on an Iranian island near the strategically important Strait of Hormuz. 

However, in a television interview broadcast on Sunday, he said he currently saw no reason to escalate the military campaign.

He also stopped short of formally declaring the war over, arguing that Washington still had to protect its Gulf allies from possible Iranian attacks.

The US naval blockade of Iranian ports, he suggested, was helping maintain security across the region.

Global oil prices fell further following Trump’s latest remarks, with Brent crude dropping more than 1% to around $91.50 a barrel, while US crude also declined.

Gulf diplomacy intensifies

Trump’s comments followed a meeting with Qatari Prime Minister Sheikh Mohammed bin Abdul Rahman Al Thani at the White House on Monday.

The US president described their discussions as excellent, while the Qatari leader said he had held positive talks with Trump and Vance on reaching an agreement and restoring regional peace.

Diplomatic efforts to end the conflict have largely been conducted through intermediaries since the war erupted following joint US-Israeli strikes against Iran in February.

Saudi Arabia, Qatar and the United Arab Emirates are among Washington’s Gulf partners that have been targeted by Iranian attacks during the conflict, while security concerns have also caused significant disruption to regional air travel.

Political pressure mounts in Washington

Meanwhile, the war is generating further political tensions in Washington.

Republican Congressman Thomas Massie on Monday announced plans to force a House of Representatives vote this week on impeaching Defence Secretary Pete Hegseth over his handling of the conflict.

Hegseth, who has received Trump’s backing, dismissed the threat, describing Massie’s effort as a “sham”.

The impeachment initiative is unlikely to succeed while Republicans retain control of Congress. However, Democrats have indicated they could pursue the matter when the new congressional session begins in January.

For Trump, the challenge is increasingly twofold: finding a diplomatic exit from the conflict while managing mounting political pressure at home and reassuring US allies across the Gulf.

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First Muslim US senator-elect El-Sayed calls for review of aid to Pakistan

He also called for restrictions on US arms sales to Israel, alleging that some American-supplied weapons were being used in actions involving what he described as genocide and apartheid.

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Abdul El-Sayed, the first Muslim elected to the US Senate, has called on Washington to reconsider its financial and military assistance to Pakistan and several other countries, arguing that American taxpayer money should not be used to support violations of international law.

El-Sayed, a Democrat who recently defeated Republican candidate Mike Rogers in Michigan, said the United States must ensure that its foreign assistance policies are consistent with international law.

In an interview with ABC, he stressed that the issue should not be limited to Israel, but should also include Pakistan, Egypt and Jordan.

“When we are giving money to a country that is using our money to violate international law, that seems to me a good place to start,” El-Sayed said.

His remarks come after US President Donald Trump announced plans to end approximately $4 billion in annual military assistance to Israel by the end of the year.

El-Sayed welcomed Trump’s proposal to reduce military aid to Israel, saying he agreed with the president’s approach.

He also called for restrictions on US arms sales to Israel, alleging that some American-supplied weapons were being used in actions involving what he described as genocide and apartheid.

The United States currently provides Israel with $3.8 billion in annual military assistance under an agreement that remains in effect until 2028.

However, El-Sayed’s criticism extends beyond Israel. He has also questioned US military assistance to Egypt, Saudi Arabia, Jordan and Pakistan, arguing that American taxpayer money should instead be directed towards domestic priorities.

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Houthi-run health ministry says airstrikes kill 33 near Yemen capital

The ministry said the strikes ​hit homes in the town of Bani Hushaysh, a Houthi stronghold ​east of Sanaa, and that most of those killed were women and children.

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At least 33 people were killed and 39 wounded in what the Houthi-run Saba news agency said ​were Saudi airstrikes on a village near Yemen’s capital Sanaa ‌on Saturday, in one of the deadliest reported attacks since fighting between Saudi Arabia and the Iran-aligned group resumed in July.

Reuters could not independently verify the account. ​Saudi Arabia’s Center for International Communication said it was investigating the report.

The ​renewed fighting between Saudi Arabia and the Houthis has shattered ⁠a 2022 UN-brokered truce that largely halted attacks between the Saudi-led ​coalition and the group, which controls Sanaa. The Houthis have since launched ​missile and drone attacks on Saudi airports and oil facilities, while Riyadh has carried out airstrikes in Yemen in support of its Yemeni allies.

The ministry said the strikes ​hit homes in the town of Bani Hushaysh, a Houthi stronghold ​east of Sanaa, and that most of those killed were women and children.

Abdul-Aziz al-Dailami, ‌director ⁠of Sehatuna Hospital in Sanaa, said many victims remained trapped under the rubble, including first responders.

“The strikes keep coming. Just as rescuers arrive, another strike hits. We have even lost some of our own medical responders, ​who have been martyred,” ​he told Reuters.

“We ⁠received a number of wounded individuals in very critical condition, with injuries to the head, chest and legs, ​as well as fractures,” al-Dailami added.

The fighting, a spillover ​from the ⁠wider US-Iran conflict, has revived a complex 12-year war in Yemen that has caused one of the worst humanitarian crises globally and fragmented the Arab world’s most ⁠impoverished ​country.

The number of people displaced since the ​latest round of fighting began has climbed to more than 200,000, the International Organization for Migration said ​in October.

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