By Liz Lee, Francesco Guarascio and Jeff Mason
BEIJING/HANOI/WASHINGTON (Reuters) - A week of turbulence unleashed by U.S. President Donald Trump's tariffs showed little sign of easing on Friday, with markets again tumbling and foreign leaders trying to work out how to respond to a dismantling of the world trade order.
Battered financial markets were given a brief reprieve Wednesday when Trump decided to pause duties for dozens of countries for 90 days. However, his escalating trade war with the world's No.2 economy, China, has fuelled fears of recession and further retaliation.
U.S. Treasury Secretary Scott Bessent tried to assuage sceptics by telling a cabinet meeting on Thursday that more than 75 countries wanted to start trade negotiations, and Trump himself expressed hope of a deal with China.
But the uncertainty in the meantime extended some of the most volatile trading since the early days of the COVID-19 pandemic.
The S&P 500 index ended 3.5% lower on Thursday and is now down about 15% from its all-time peak in February.
Asian indices followed Wall Street lower on Friday with Japan's Nikkei down nearly 5% and Hong Kong stocks heading towards the biggest weekly decline since 2008.
A sell-off in U.S. Treasuries - which caught Trump's attention before Wednesday's pause - picked up pace again on Friday with the yield on the 10-year note set for its biggest weekly spike since 2001, LSEG data showed.
Bessent on Thursday shrugged off the renewed market turmoil and said striking deals with other countries would bring certainty.
The U.S. and Vietnam have agreed to begin formal trade talks, the White House said. The Southeast Asian manufacturing hub is prepared to crack down on Chinese goods being shipped to the United States via its territory in the hope of avoiding tariffs, Reuters exclusively reported on Friday.
Japanese Prime Minister Shigeru Ishiba, meanwhile, has set up a trade task force that hopes to visit Washington next week. Taiwan said it also expects to be included in the first batch of trading partners to hold talks with Washington.
CHINA DEAL?
As Trump suddenly paused his 'reciprocal' tariffs on other countries hours after they came into effect earlier this week, he ratcheted up duties on Chinese imports as punishment for Beijing's initial move to retaliate.
Trump has now imposed new tariffs on Chinese goods of 145% since taking office, a White House official said.
Chinese officials have been canvassing other trading partners about how to deal with the U.S. tariffs, most recently talking to counterparts in Spain, Saudi Arabia, and South Africa.
Trump told reporters at the White House he thought the United States could make a deal with China, but he reiterated his argument that Beijing had "really taken advantage" of the U.S. for a long time.
"I'm sure that we'll be able to get along very well," Trump said, adding that he respected Chinese President Xi Jinping. "In a true sense, he's been a friend of mine for a long period of time, and I think that we'll end up working out something that's very good for both countries."
China, which has rejected what it called threats and blackmail from Washington, restricted imports of Hollywood films, targeting one of the most high-profile American exports.
The U.S. tariff pause also does not apply to duties paid by Canada and Mexico, whose goods are still subject to 25% fentanyl-related tariffs unless they comply with the U.S.-Mexico-Canada trade agreement's rules of origin.
With trade hostilities persisting among the top three U.S. trade partners, Goldman Sachs estimates the probability of a recession at 45%.
Even with the rollback, the overall average import duty rate imposed by the U.S. is the highest in more than a century, according to Yale University researchers.
The pause also did little to soothe business leaders' worries about the fallout from Trump's trade war and its chaotic implementation: soaring costs, falling orders, and snarled supply chains.
One reprieve came, however, when the European Union said it would pause its first counter-tariffs.
The EU had been due to launch counter-tariffs on about 21 billion euros ($23 billion) of U.S. imports next Tuesday in response to Trump's 25% tariffs on steel and aluminium. It is still assessing how to respond to U.S. car tariffs and the broader 10% levies that remain in place.
Finance ministers from the 27-country bloc will brainstorm on Friday how to use the pause to get a trade deal with Washington and how to coordinate their efforts to handle tariffs if they do not.
European authorities estimate the impact of the U.S. tariffs on its economy would total 0.5% to 1.0% of GDP. Given the EU economy as a whole is forecast to grow 0.9% this year, according to the European Central Bank, the U.S. tariffs could tip the EU into recession.
(Reporting by Reuters newsrooms; Writing by John Geddie; Editing by Lincoln Feast)
