In a dramatic late-night announcement on Wednesday, U.S. President Donald Trump declared a 90-day pause on his sweeping reciprocal tariffs for most countries but notably excluded China, hiking tariffs on Chinese imports to a staggering 125%, up from the previously imposed 104%.

The pause comes after several global allies opted for dialogue instead of retaliation, prompting Trump to temporarily soften his aggressive trade stance. However, he accused China of showing a “lack of respect” and justified the escalated tariff rate as a necessary measure.

Markets reacted explosively: the S&P 500 surged 9.5%, the Dow jumped nearly 3,000 points, and Nasdaq soared 12.2% marking the biggest stock market rally since World War II.

The tariff war between the world's top two economies escalated rapidly. After China slapped an 84% levy on American goods, Trump immediately hit back with the 125% blow, intensifying fears of prolonged economic tensions.

The European Union and India also remain cautious, with Brussels approving tariffs on $23.2 billion of U.S. goods, and India monitoring the impact of Trump’s 26% tariff.

The tariff war may have paused for some—but for China, it’s only getting hotter.