President Trump on Wednesday paused much of his announced “reciprocal” tariffs in favor of a universal, 10% rate on all countries but China, sending markets surging and easing mounting fears of a potential recession.
Trump in a social media post said he authorized a 90-day pause on the import taxes that varied from country to country based on a complex formula relating to each country’s trade surplus with the United States. Imports will now be taxed at a set, 10% rate, less than half the average tariff rate that had been in place once those reciprocal taxes went into effect.
The key exception is China, which exports everything from children’s toys to factory machinery. Trump announced a bigger, 125% import tax on that country just hours after China announced an 84% tariff on U.S. goods.
“The world is ready to work with President Trump to fix global trade, and China has chosen the opposite direction,” U.S. Secretary of Commerce Howard Lutnick said in a social media post.
Nevertheless, the announcement calmed markets that had been in freefall over the past week. The Dow Jones Industrial Average surged more than 2,000 points, or nearly 6%. The Nasdaq Stock Exchange surged nearly 10%.
Most restaurant stocks were up, including McDonald’s, Yum Brands, Restaurant Brands International and Darden. Casual-dining names that had been punished in previous days, like Outback Steakhouse owner Bloomin’ Brands (up 15%), Dine Brands (up 11%) and Brinker International (9%), as well as companies like Jack in the Box (10%), Cava (15%) and Shake Shack (up 14%), Sweetgreen (13%) and Dutch Bros (16%) were up the most.
Kura Sushi, which reported earnings on Wednesday, shot up around 30% on bullish profitability projections.
Red Robin, El Pollo Loco and Rave Restaurant Group were the only names to decline on Wednesday.
Trump last week announced a sweeping set of tariffs on most U.S. trading partners, of at least 10% and as high as 50%, setting off a trade war as those tariffs went into effect on Wednesday, setting the average U.S. tariff at 22%, according to Yale.
That move sent stocks plunging 10% in two days last week. Consumer confidence plunged last month. Analysts at J.P. Morgan and Goldman Sachs raised their outlook for a recession.
Trump himself acknowledged the market led to his decision to pause the import taxes, according to CNN. “People were getting a little queasy,” he said.
Foodservice consulting firm and CSP sister company Technomic, citing early-year sales weakness and consumer confidence concerns, last week lowered its outlook for industry sales this year. The firm had projected a 5.1% increase in sales this year. It lowered those projections to a baseline forecast of 3.5%. That projection also featured a low-sales forecast scenario of 2.8% growth and a high of 4.2%.
According to Technomic, 49% of restaurant operators said they were concerned about tariffs, though that was well below the 79% who said they were concerned about food cost increases and 55% who said they were worried about a slowing economy.
The extent of Trump’s tariff plan stunned even many of his backers who worried that it would plunge the world into an economic downturn. The National Restaurant Association had estimated that tariffs on Mexico, Canada and China—before the recent increase—would cost restaurants $12 billion.
Operators worried about everything from the cost of paper takeout bags to the cost of opening a new restaurant. Recessionary fears made it difficult for some chains to get financing. Chuck E. Cheese owner CEC Entertainment struggled to get interest from investors in a $660 million bond offering. Chili’s paused a plan to switch from plastic to-go bags to paper bags out of concern for the potential of tariffs to drive up those costs.
BTIG analyst Peter Saleh said in a note on Wednesday that a prolonged global trade war “could result in significantly higher input costs for anything and everything that goes into building a restaurant.” He also worried that supply shortages could delay new unit openings and lead to missed growth projections this year.
But Wednesday’s pause kicks the can down the road until July.
A version of this story originally appeared in CSP Daily News sister publication Restaurant Business.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.