US President Donald Trump abruptly paused tariffs on most countries, sparking euphoria on global markets Thursday, but upped the ante on a brutal trade war with superpower rival China.
After days of turmoil, stocks on Wall Street and across Asia saw huge surges in reaction to Trump's announcement that he was halting a levy hike for almost all nations for 90 days.
But Trump also said he was raising tariffs on China to 125 percent because of a "lack of respect."
Beijing hit back with retaliatory tariffs of 84 percent on US imports, which came into effect at 12:01 pm (0401 GMT) on Thursday, the latest salvo in an escalating standoff between the world's two largest economies.
Trump has denied that he backtracked on the tariffs, telling reporters that "you have to be flexible."
"People were jumping a little bit out of line, they were getting yippy, a little bit afraid," Trump said. "Yippy" is a term in sports to describe a loss of nerves.
He said he had been watching the "very tricky" state of the crucial US bonds market before his decision.
"I saw last night where people were getting a little queasy," he said, as US bond yields rose during the stocks sell-off -- a major economic red light as American sovereign government debt is normally seen as a safe haven for investors in troubled times.
Trump also predicted that trade deals will be made with all countries, including China, which has for now refused to roll back retaliatory tariffs on US goods.
"A deal's going to be made with China. A deal's going to be made with every one of them," Trump said, adding however that China's leaders "don't quite know how to go about it."
Trump also said that he "can't imagine" increasing Chinese tariffs more than he has.
- China duel -
Markets have been on a rollercoaster ride since Trump's announcement of sweeping global tariffs one week ago on what he called "Liberation Day" before his dramatic pause on Wednesday.
Trump had imposed 10 percent baseline tariffs on all countries which came into effect on Saturday, and higher rates on key trading partners such as China and the European Union that he accused of cheating the United States, which activated on Wednesday.
But as markets swayed yet again, Trump said in a surprise announcement on his Truth Social network that "I have authorized a 90 day PAUSE" on the higher tariffs, while the baseline 10 percent would remain.
He said that he took the decision after more than 75 countries reached out to negotiate and did not retaliate.
Japan -- which had been slapped with 24 percent under the so-called reciprocal tariffs -- said it welcomed the news but still "strongly" demanded that Washington reconsider other levies on its steel and auto exports.
The European Union had earlier launched its own counterattack, announcing measures targeting some US products from next week in retaliation for American duties on global steel and aluminum exports.
The 27-nation bloc will hit more than 20 billion euros' worth of US products, including soybeans, motorcycles and beauty products.
But the EU notably did not retaliate against the separate "Liberation Day" tariffs of 20 percent that came into effect on Wednesday.
- 'BE COOL!' -
Wall Street stocks rocketed on Trump's pause announcement.
The S&P 500 surged 9.5 percent to 5,456.90, snapping a brutal run of losses over the past week.
Markets in Asia also rallied Thursday, with Hong Kong, Tokyo, Taipei, Australia, Indonesia and Singapore sharply higher.
Stocks in Chinese economic powerhouse Shanghai were also up, despite Trump's decision to further hike tariffs.
Before his pivot, Trump said world leaders were rushing to negotiate "tailored" deals with the United States, with Japan and South Korea among those sending delegations to Washington.
"I'm telling you, these countries are calling us up kissing my ass," Trump told a dinner with fellow Republicans on Tuesday night.
Trump believes his policy will revive America's lost manufacturing base by forcing companies to relocate to the United States.
The billionaire former property tycoon has particularly raged against China, accusing it of excess production and "dumping" inexpensive goods on other economies.
With the trade war between the world's two biggest economies showing little signs of abating, China told tourists on Wednesday to "fully assess the risks" before travelling to the United States.
Separately, US Defense Secretary Pete Hegseth warned against Chinese "threats" as he visited Panama, whose canal is at the center of a row between Beijing and Washington.
