What you need to know

At 9:37am Eastern Time, President Donald Trump declared on his social media platform that it’s a “great time to buy.” By 1:18pm, the White House announced that retaliatory tariffs (not the basic 10% which applies across the board) would be paused for 90 days on all countries except for China.

The move followed growing anxiety in the bond markets. Yields on U.S. government debt had risen sharply—a signal that investors were assigning greater risk to American sovereign credit. At one point yesterday, U.S. bonds were yielding more than those of Greece, a symbolic shift that suggested global markets saw less risk in holding Greek debt. Reports indicated that major institutional holders in China and Japan had begun offloading U.S. debt at scale.

The shift in tone suggests that the administration was watching bond-market developments closely. Trump admitted: “The bond market is very tricky... I saw last night where people were getting a little queasy.”

The Federal Reserve yesterday appeared to accelerate liquidity injections. Reverse repurchase agreements (repos) dropped from $2.5trn to just $148bn, signaling a large and largely unreported infusion of liquidity into financial markets. The development received little coverage in the mainstream press.

Inside the administration, concern was reportedly mounting yesterday. Treasury Secretary Scott Bessent was said to fear that credit markets were nearing a breaking point. Pressure from industry groups, combined with a well-timed TV appearance by Jamie Dimon, Chairman of JP Morgan, contributed to a sense of urgency.

Soon after the announcement of the 90-day pause on tariffs, Goldman Sachs retracted its U.S. recession forecast.

The tariff pause marked a temporary halt in hostilities, but not a shift in direction. A new 50% tariff on Chinese goods, which raised the cumulative rate to 104%, was interpreted by markets as a clear move toward decoupling. Beijing responded with 84% tariffs on U.S. imports and declared it “will not bow to tariff threats.” Amazon has reportedly cancelled inventory orders from China.

The policy appears targeted at structural issues: the bilateral trade imbalance, illicit fentanyl flows, and vulnerabilities in critical supply chains such as pharmaceuticals and semiconductors. But the broader consequences may be under-appreciated.

The Chinese yuan fell to its weakest level in 18 years, providing Chinese exporters a modest advantage. China continues to operate a dual exchange-rate system: one fixed for domestic use, the other loosely managed for international trade. The widening spread between the two risks encouraging capital flight and the growth of black-market currency trading.

Commodity markets also reacted. Crude oil prices fell more than 6%, slipping below $56 per barrel, amid fears of weakened global demand.

Although U.S. officials downplayed the risk of retaliation, China’s dominance in supply chains—from medical supplies to every day household goods—makes a full decoupling more painful than it might appear on the surface.

Strategic risk is also intensifying. China may increase military pressure in the South China Sea, test U.S. security commitments in the Indo-Pacific, or escalate threats against Taiwan. The People’s Liberation Army is reportedly rehearsing scenarios involving a blockade or invasion. Meanwhile, U.S. forces remain overstretched in the Middle East and Europe, with munition stockpiles under pressure due to supplies to Israel, combat against the Houthis in Yemen, and supplies to Ukraine since early 2022.

The trade strategy is aimed at real and long-standing issues, but the pace and posture of its execution carry hazards. Though confrontation may have been inevitable, the method has inflamed rather than contained geopolitical risk.

The decoupling of the U.S. and China, once theoretical, is now material—and the fallout is just beginning.

An opening?

Hours after tariffs on Chinese goods were raised to 125%, the U.S. president signaled openness to negotiations, suggesting a meeting with Chinese President Xi Jinping was possible. “I like him, I respect him—sure, I’d meet with him,” he told reporters.

Early-stage diplomatic discussions have reportedly floated the idea of a presidential visit to China, with both sides eager to portray such a meeting as a political victory. While no formal agreement has been reached, U.S. officials suggest a visit could take place as soon as April. Although Trump has shown interest in negotiating tariff reductions with multiple trading partners, formal talks with China would have the most important impact on the world economy and the geopolitical balance of power.

Whether this moment represents the beginning of détente—or merely a pause before a deeper rupture—remains to be seen.

America First

U.S. says Moroccan plan for Western Sahara should be upheld

Secretary of State Marco Rubio said on Tuesday, during a meeting in Washington with Moroccan Foreign Minister Nasser Bourita, that efforts to resolve the Western Sahara dispute should be based on Morocco’s autonomy plan. The proposal offers limited self-rule for the region under Moroccan sovereignty. According to State Department spokesperson Tammy Bruce, President Donald Trump’s 2020 recognition of Morocco’s claim over Western Sahara remains U.S. policy. Rubio, acting under Trump’s direction, urged all parties to engage in talks “without delay.”

Morocco’s plan, formally known as the Autonomy Proposal, is opposed by the Polisario Front, a pro-independence movement backed by Algeria, which seeks a referendum that includes the option of full independence.

It’s now the U.S. vs China, everyone else needs to pick a side

Japanese Defense Minister Gen Nakatani said on Tuesday that Japan was interested in joining NATO’s command structure for its Ukraine mission, headquartered at a U.S. base in Wiesbaden, Germany.

The request relates to NATO’s Security Assistance and Training Mission for Ukraine, though a decision to deploy members of Japan’s Self-Defense Forces has not yet been made.

Japan regards China as a strategic threat and has accelerated its defense buildup in recent years.

Tokyo has also been unsettled by growing military coordination between China, North Korea, and Russia.

Rutte also expressed concern about China’s expanding military capacity, saying, “China is building up its armed forces, its navy, at a rapid pace.” He also met with Japanese Prime Minister Shigeru Ishiba on Wednesday.

Defense Secretary visits Panama, pledges to counter Chinese influence

U.S. Defense Secretary Pete Hegseth said on Tuesday that the United States would act to counter Chinese influence over the Panama Canal. Speaking during a visit to Panama City, where he met President José Raúl Mulino, Hegseth also announced deeper security cooperation with Panama’s armed forces.

While President Donald Trump has previously suggested the U.S. could reclaim control of the canal by force, Hegseth’s tone was notably more conciliatory. “Together with Panama in the lead, we will keep the canal secure and available for all nations,” he said.

Roughly 40% of U.S. container traffic—worth an estimated $270bn annually—passes through the canal, which remains the second busiest interoceanic waterway in the world. The U.S. Navy also regularly uses it to move warships between the Atlantic and Pacific Oceans. The canal was built by the U.S. and sold to Panama for $1 in 1979.

Beijing rejects claims that Chinese troops are fighting alongside Russian army

Beijing said on Wednesday that claims Chinese nationals were fighting alongside Russian forces in Ukraine were “totally unfounded.” On Tuesday, Ukrainian President Volodymyr Zelensky stated that two Chinese men had been captured in Donetsk province while fighting with the Russian army.

While China claims neutrality in the conflict, it continues to provide Moscow with economic support by purchasing large volumes of Russian oil. It has also sold dual-use goods that can serve both civilian and military purposes, though it has stopped short of supplying weapons, troops, or military expertise.

A U.S. State Department spokesperson said on Tuesday the reports were “disturbing,” and added: “China is a major enabler of Russia in the war in Ukraine… China provides nearly 80 percent of the dual-use items Russia needs to sustain the war.”

Europe's center of gravity shifts east, politics moves right, & hostility to migrants from the south rises

Germany’s centre-left Social Democratic Party (SPD) and the conservative Christian Democratic Union (CDU), along with its Bavarian sister party, the Christian Social Union (CSU), have finalized a coalition agreement.

As expected, CDU leader Friedrich Merz is set to become chancellor in May.

The SPD has not yet ratified the deal and is expected to hold a vote within two weeks.

If approved, Merz could be elected by the Bundestag before the end of April or in early May.

Birth pangs in the birthplace of civilization

An Israeli airstrike on Wednesday killed at least 29 Palestinians in the Shejaia district of Gaza City, according to Hamas-controlled local health authorities. The strike hit a multi-storey building in the eastern part of the city. Israel claimed it had targeted a senior Hamas figure involved in planning attacks in the area.

The United Nations reports that 400,000 people have been displaced since Israel resumed its offensive on 18 March, ending a two-month ceasefire with Hamas. Local health officials say 1,500 people have died since the campaign restarted. It’s unclear how many of the dead were civilians and how many combatants, but the toll on the civilian population is undoubtably extreme.

Rocket fire from Hamas and Islamic Jihad has resumed, with 12 people injured this week in the southern Israeli city of Ashkelon. The Israeli military said it was working to establish a buffer zone along the Gaza border and had captured what it called the Morag Corridor, between Rafah and Khan Younis in the south of the enclave.

Israel is particularly focused on sealing the border with Egypt, which it accuses Hamas of using to smuggle weapons through tunnels from the Sinai. Egypt denies this and has itself constructed a buffer zone in recent years.

Egypt and Israel have maintained a peace treaty since 1979, but Egypt has consistently turned a blind eye to tunnel smuggling into the Egyptian town of Rafah (across the border from the Gazan Rafah).

Israeli Defense Minister Israel Katz said the current campaign aims to “increase pressure on Hamas for the sake of releasing hostages.” Some Israelis have expressed outrage over the renewed offensive, fearing it will reduce the chances of hostages being returned alive.