Trump backflips on tariffs but risks remain

US President Donald Trump has agreed to a pause in the reciprocal tariffs imposed on all nations, bar China, in excess of 10% for 90 days to encourage nations to go to the negotiating table.

However, China saw tariffs increased to 125%, which will drive a further wedge between the two nations which appear to be gearing up for a trade war.

Betashares chief economist David Bassanese said despite Trump's concession, the global economy and particularly the US, still face "enormous risk" in the weeks and months ahead.

"While equity markets bounced overnight, this may well be but one of likely several cruel bear market rallies in what had become a very oversold market in the short-term.  We're not out of the woods just yet," Bassanese said.

"Risks to the global outlook remains for several reasons. Indeed, the good ship USA has still been hit by an iceberg and is taking on water.  All that's happened is Captain Trump has told the crew to stop the engines."

Bassanese said the US is still facing a significant increase in the average effective tariff rate to around 20%, instead of 30%.

"That still represents a significant hit to US inflation and economic activity sufficient to likely cause a US recession in their own right - unless Trump quickly backs down further," he said.

"What's more, even the pause in tariffs leaves the global business community facing significant uncertainty in terms of the cost pressures that will face in the months ahead - which will lead to a curtailment in both investment and hiring plans.

"It's the uncertainty with regard to eventual tariff levels that is likely even worse for economic growth than the actual tariffs the US imposes."

Despite warnings the worst may be yet to come, markets surged off the back of the news, which deVere Group chief executive Nigel Green said was expected.

Wall Street's S&P 500 leapt 6%, while the Nasdaq Composite was almost 8% higher.

"The markets have been crying out for common sense. The economic vandalism of tariffs was never sustainable. A backpedal wasn't just likely - it was always inevitable," Green said.

"You can't fight the basic needs of markets, businesses, and consumers without consequences."