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Some Tariffs Frozen 90 Days, China Levy Rises to 125%, Markets Whipsaw
April 14, 2025
In a dramatic policy pivot with far-reaching global consequences, President Donald Trump announced Wednesday, April 9, a 90-day suspension of his sweeping tariff campaign against most US trading partners, while sharply escalating duties on Chinese imports to a staggering 125%.
Posting on his Truth Social account, Trump said the temporary pause comes in response to what he called "overwhelming outreach" from foreign governments seeking a diplomatic resolution to the intensifying trade war. The announcement included a key caveat: goods currently "on the water" will be exempt from the heightened tariffs, offering a temporary lifeline to global supply chains already strained by weeks of uncertainty.
"More than 75 Countries have called Representatives of the United States... to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation," Trump wrote. He added that since many of these countries "have not... retaliated," the US would slash most tariffs to a 10% baseline for a 90-day grace period.
But the olive branch didn't extend to Beijing. Citing China's "lack of respect" for fair market practices, Trump announced that tariffs on Chinese goods would surge to 125%, replacing the already steep 104% rate implemented just days prior. "The days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable," Trump wrote.
Beijing had already fired back quickly. China's Commerce Ministry said it would more than double existing tariffs on U.S. imports, raising average rates from 34% to 84% which was raised the following day to 104% and again Thursday to 125%. The tit-for-tat salvo rattled global markets over the wild ride last week.
A temporary exception also paused tariffs on imported electronics, including smartphones, laptops, CPUs, memory chips, and potentially some semiconductor manufacturing equipment, solar cells, flash drives, tablets, memory cards, and flat-panel TVs. Commerce Secretary Howard Lutnick said, "Electronics covered under Friday's exemption will be subject to semiconductor-related tariffs that will be enacted in the next one or two months and will include not just raw chips but also products containing chips, like smartphones, laptops, and flat panels."
Commodity markets experienced one of the wildest intraday swings of the year last week. Crude oil, which had been down as much as 5% early in the day on fears of weakened demand and tariff drag, reversed sharply after the tariff suspension announcement. WTI crude ended the day up nearly 5%, for a 10%+ intraday swing that stunned energy traders.
In the last Wednesday morning's trading hours, the impact was felt even more dramatically in the petrochemical markets as Ethylene monomer traded at 18.75 cents per pound, and Polymer-Grade Propylene (PGP) at 31 cents per pound. But after the 90-day suspension was revealed, all PGP offers were abruptly pulled from the spot market as traders reassessed forward pricing and supply risks as liquidity vanished with nobody wanting to sell PGP into a market where trade policy could whipsaw prices again in 48 hours. Spot Ethylene continued inching below $.18/lb this past week, while spot PGP bounced a penny to $.325/lb.
The escalating tariffs on China are also expected to pinch the country's production of Propylene and Polypropylene. Chinese steam crackers and Propane Dehydrogenation (PDH) units which are heavily reliant on imported LPG feedstocks, 60% sourced from the US, will face significant challenges due to the 125% tariff and could lead to widespread plant slowdowns or shutdowns in China. This could significantly reduce Chinese output of Propylene and downstream Polypropylene resin produced competitively from well-priced feedstocks, hampering the Chinese plan to gain international Polypropylene market share after already building some 30 PDH units to feed monomer to new Polypropylene reactors. In time, feedstock could be procured from the middle east, but costs are some $200/MT higher with limited capacity. China's petrochemical margins have been under significant pressure since April 2023 and these tariffs could take a lot of wind from their sails, and could lead to significantly reduced operating rates or even the shutdown plants, while shifting global PP trade flows.
As part of Trump's 90-day tariff suspension, most tariffs targeting European Union (EU) member states appear to be paused rather than fully reversed. The European Commission has welcomed the suspension as a "constructive step," but Brussels has emphasized it expects a permanent resolution, not temporary political theater. Key European exports, such as automobiles, aerospace components, and specialty chemicals, are expected to benefit from the reprieve, especially sectors that had been bracing for retaliatory duties under WTO disputed cases. However, the EU has suspended its tariffs, pending further negotiations. On Friday, French President Emmanuel Macron said the partial suspension of US tariffs remains fragile and the EU must continue to prepare counter measures to defend itself. While the European Trade Commissioner Maros Sefcovic is scheduled to meet with US officials in Washington on Monday.
Brazil made headlines several months ago when it raised import tariffs on Polyethylene (PE) and Polypropylene (PP) from 14% to 20%, citing protection of domestic producers and volatility in global resin flows. There has been ongoing industry pressure in Brazil from converters and consumer goods manufacturers to relax or reverse those increases due to rising domestic costs and global supply shifts. However, sources in the Latin American petrochemical market have suggested that Brazilian authorities are evaluating additional safeguard measures, especially if Chinese or US resin, redirected due to tariffs, floods Mercosur markets. This makes Brazil, and Latin America in general, a critical swing market for polymer trade flows in 2025. If the country hikes tariffs further or tightens quotas, it could dramatically impact US, Middle Eastern, and Asian exporters who have already begun re-routing cargoes.
On the bond front, Treasury yields briefly surged as investors braced for inflationary fallout and renewed geopolitical friction. The benchmark 10-year note touched 4.47% before a solid afternoon auction helped pull rates back slightly. Still, long-term demand concerns remain as fiscal uncertainty compounds monetary tightening.
Treasury Secretary Scott Bessent tried to calm nerves at a closed-door meeting with Wall Street executives, stating the administration believes "we are in pretty good shape." His remarks stood in contrast to JPMorgan CEO Jamie Dimon, who warned earlier that the economy could be "headed toward recession" if tariff unpredictability continues.
As analysts scramble to determine whether the 10% rate represents a new baseline or a temporary truce, the global trading system is once again in flux. For now, the world has 90 days to sort through the uncertainty, or brace for the next tariff shockwave.
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