WASHINGTON — President Trump partially backed down Wednesday on his plan to hike tariffs on countries around the world, with the exception of China, a dramatic reversal after days of market turmoil that led to a surge of relief on Wall Street.

Trump said he would pause a universal, 10% tariff rate on most countries that went into effect a week ago, while lowering country-specific rates on trading partners facing higher rates with a new baseline of 10%.

China, meanwhile, will be hit by yet another increase in duties, with imports from Beijing now facing a 125% tariff rate, after China matched Trump’s last two rate hikes over the past week.

Markets responded with their biggest rally in five years, a turn of fortunes after news of the president’s policies last week wiped $7 trillion in value over just three days of trading.

The Dow Jones industrial average surged over 2,600 points, while the Standard & Poor’s 500 increased over 7%. The Nasdaq was up 10% within an hour of the announcement.

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable,” Trump wrote on Truth Social, leading markets to soar minutes later.

“Conversely, and based on the fact that more than 75 Countries have called… to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States,” Trump continued, “I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!”

Treasury Secretary Scott Bessent told reporters at the White House that Trump’s decision to issue a pause was the result of most countries around the world refraining from issuing retaliatory measures, and instead approaching the administration with offers to negotiate.

“President Trump created maximum negotiating leverage for himself,” Bessent said. “The ones that we have lowered went into effect a week ago, and we have just been overwhelmed — overwhelmed — by the responses from, mostly, our allies, who want to come and negotiate in good faith.”

Karoline Leavitt, the White House press secretary, pushed back against questions from the media over the president backing down in the face of market pressures, as well as assessments from the country’s major banking institutions, such as JP Morgan Chase and Goldman Sachs, that his new trade policy would push the country into recession.

“Many of you in the media clearly missed the art of the deal,” Leavitt said. “You clearly failed to see what President Trump is doing here.”

This is a breaking news story and will be updated.