The dramatic policy reversal that rocked financial markets and diplomatic circles alike came when President Donald Trump announced a 90-day delay in reciprocal tariffs on most of America’s trading partners — with one exception: China. The decision came just days after foreign investors — mostly Japan and China — sold off huge chunks of U.S. Treasury bonds, stoking bond market turmoil and raising alarm signals on the health of the U.S. economy.
Although there is no official public statement linking the tariff moratorium to Japan’s moves, the timing has created rampant speculation. The chain of events presents an insightful glimpse into how global finance is influencing trade policy at the top level today.
April 2025 has been an unstable month so far in the U.S. bond market. 10-year U.S. Treasury bond yields jumped to 4.51% — the biggest weekly rise in more than 10 years. To most Americans, that may be an abstract statistic. But rising bond yields make it more costly to the U.S. government, businesses, and regular individuals to borrow money. Mortgage rates rise. Auto loans become more expensive. And businesses might hesitate to grow or expand employment.
Behind this yield surge lay a torrent of sales — and leading the way was Japan, which offloaded an unprecedented $61.9 billion in U.S. Treasuries. Not far behind came China, selling off another $51.3 billion. Analysts attribute the sales to largely being triggered by economic prudence and efforts to shield domestic institutions from risks associated with U.S. interest rate policies.
One of the major players was Norinchukin Bank, a Japanese private lender. Under pressure from its own finances, the bank tried to restrict exposure to U.S. assets — something that unintentionally jangled American debt-market confidence. Although the sale wasn’t orchestrated by the Japanese government, its size helped to signal to Washington that major allies were growing increasingly nervous about U.S. economic stewardship.
Responding to the financial turmoil, President Trump suddenly announced: the U.S. would temporarily suspend its tit-for-tat tariffs on most nations for 90 days. That means long-time allies in Europe and Asia are not exempted. The intention? Soothe the markets and provide an interim respite to American firms straddled by both inflation and foreign trade tensions.
Actually, tariffs on Chinese imports are being raised from 104% to 125%, under the charge of so-called “continued unfair trade practices and retaliatory tariffs on American products.” Whereas other nations will enjoy 90-day reprieve with 10% import tariffs, China will encounter an increasing trade wall.
This is not an act of retreat, Treasury Secretary Scott Bessent stated during a press conference. “This is an act of recalibration — an act to make sure American markets remain strong and that we can continue to negotiate from positions of power.”
But critics counter that this decision reflects increased pressure by investors and foreign governments and not some masterplan economy. “The markets forced Trump’s hand,” one past White House advisor stated. “This is about avoiding a financial meltdown.”
Wall Street heaved a sigh of relief. Stocks jumped broadly, ending weeks of slippage fueled by worry about an all-out trade war. Companies — and particularly manufacturing and agricultural firms — embraced the respite, hoping it reflects a more stable path ahead.
Japan’s top government spokesperson, Chief Cabinet Secretary Yoshimasa Hayashi, welcomed the temporary halt on tariffs in Tokyo and called for an examination of the remaining tariffs on steel, aluminum, and automotive components. Japan has complained extensively that its sectors are being unfairly hit since it is one of the closest allies of the U.S.
Japan’s benchmark stock index, the Nikkei 225, rose 8% in early trading Thursday — an indication of investor confidence throughout the region in general in the Asia-Pacific area. In Europe, meanwhile, governments offered cautious backing to the move, with many urging clarification and continuity in American trade policy.
However, all may not be well with this news. Some economists fear that the short-term hiatus will merely put off more profound problems. “This is a patch-up job and not a solution,
” opined Global Trade Forum chief economist Dr. Lila Morgan. “The underlying uncertainty persists.”
Even with the temporary rally, there are still warning signals emanating from the economy. Forecasts are that if trade tensions continue — particularly with China — the U.S. is on track to experience a 4.8% reduction in investment and 1.9% drop in real consumer expenditures by the end of the year. Such an economic chill could push the nation into recession.
Sectors such as steel, wood products, cars, and drugs are on tenterhooks. Some are still hit with high tariffs and others are in limbo about when to produce more or cut back until there are more defined policies.
Supporters, among them some prominent Republicans, describe the decision as prudent in the current financial climate. “This demonstrates that President Trump is paying attention to the markets,” said Senator Jake Holloway (R-TX).
“This is a smart tactical move.”
Critics charge that the White House acquiesced to pressure in the markets. “This is not strategy — it’s surrender,” charged Representative Maya Cortez (D-NY). “You can’t wage a trade war through Twitter and make the economy hold its breath indefinitely.”
