US Stock Surge: Trump Suspends Tariffs to Boost Market Confidence

The decision to lower tariffs has caused significant spikes in major indices, reflecting investor optimism.

US stocks surged dramatically following President Donald Trump's announcement to suspend steep tariffs on imports from most countries. Instead of higher levies, a 10% import tax rate will now be imposed, a reversal that has given traders a boost. However, Trump intends to escalate tariffs on Chinese goods, increasing them to at least 125%, effective immediately.

Following this unexpected shift, the S&P 500 experienced a breathtaking leap of 9.5%, marking its largest single-day rise since 2008, alleviating concerns that had plagued the market in the preceding days over the exponential tariffs. This decision came less than a day after new tariffs were enforced, significantly impacting trade partners like Vietnam, which faced a steep 46% levy on imports.

Initially, Trump's announcement led to a tumultuous 10% drop in the S&P as analysts warned of heightened recession risks, both domestically and globally. With investors skittish, bond markets also began to show signs of strain as US government debt saw a sell-off. Economic analysts, including Paul Ashworth from Capital Economics, outlined that Trump's concession was necessary due to mounting pressures from the stock and bond markets.

Despite this positive turn in the stock market, indices remain below pre-announcement levels, with the S&P 500 down approximately 3% and more than 8% for the year. Although the proposed Chinese levies continue to pose a challenge, the National Retail Federation had indicated that shipping volumes at US ports were likely to plummet by 20% compared to the previous year due to the tariff impositions.

In the wake of his decision, Trump hinted at wanting to negotiate with China and expressed willingness to issue tariff exemptions for specific companies, diverging from earlier positions. Following the announcement, influential figures in Washington—many of whom had supported him during his campaign—expressed their approval, reflecting the political pressure that may have influenced Trump’s about-face.

This unexpected pivot caught many by surprise; almost simultaneously, Goldman Sachs issued a negative economic forecast concerning a potential recession linked to new tariffs. Just hours later, the bank adjusted its predictions but maintained a cautious outlook regarding US economic growth, estimating a 45% chance of recession.

Amid the chaos, notable business leaders, including hedge fund manager Bill Ackman and Tesla CEO Elon Musk, extended their thanks to Trump for the respite on tariffs, signaling a broader sense of relief among business executives.