Markets Rallied After Tariff Freeze: In a surprise move, U.S. President Donald Trump
announced a temporary suspension of most retaliatory tariffs,
easing fears of an escalating trade war and sparking a global market rally led by Asian equities.
The decision served as a reassurance amid sharp volatility,
driving gains across indices, stocks, and currencies.
However, caution persisted, as analysts warned that the 90-day truce may not be enough to resolve deep-rooted trade disputes.
Contents
Wall Street Sees Historic Buying
Cautious Optimism Amid Conflicting Signals
Asian Markets Rebound Strongly After Tariff Suspension
Asian equities recorded their most substantial rally over two years,
driven by renewed global momentum following Trump’s announcement of suspending most retaliatory tariffs.
The impact was quickly felt across Asian markets, which had previously been hit hard by escalating tariffs.
Markets surged on Thursday, while European index futures soared by more than 9%,
supported by a 9.5% jump in the S&P 500, its best one-day performance since the global financial crisis.
Investors welcomed the abrupt shift in U.S. trade policy,
but it came on the heels of significant turbulence in the U.S. bond market, prompting Trump to reevaluate his approach.
Meanwhile, 10-year U.S. Treasury yields dropped after rising 34 basis points over the previous three days,
raising questions about the stability of the world’s largest debt market.
The U.S. dollar index declined for a third consecutive day,
while gold saw its most significant one-day gain in 18 months.
Frederic Neumann, Chief Asia Economist at HSBC, commented:
“Investors in Asia felt immediate relief after the announcement. This move opens the door for negotiations,
crucial for export-driven Asian economies significantly affected by the tariffs.”
China Left Out of the Deal Yet Markets Rally Despite Yuan Drop
The U.S. administration’s decision to suspend tariffs followed losses totaling more than $10 trillion
in global stock market capitalization and a sharp fall in U.S. Treasury performance.
President Trump announced a temporary 90-day tariff suspension for dozens of countries to calm markets and manage the crisis.
However, China was notably excluded,
Washington increased tariffs on Chinese goods to 125% in retaliation for Beijing’s 84% duties on U.S. imports.
A White House official noted that other countries facing high tariffs would receive temporary relief,
lowering them to the minimum rate of 10%. At the same time, China would remain subject to the elevated rate.
Despite this, leading indices in Hong Kong and China posted substantial gains,
ignoring the yuan’s fall to its lowest level since 2007 in domestic trading.
Trump also drew attention by describing the U.S. bond market as
“beautiful” in remarks on Wednesday amid continued volatility triggered by his trade policy.
Short-term Treasury bonds, typically considered safe-haven assets,
declined as capital flowed into equities amid broad optimism.
Ryan Neuman, from Zephyr Financial Advisory, stated:
“The past period felt like a rollercoaster ride. Markets inherently dislike uncertainty,
and the surprise tariffs were unsettling. We’re seeing a true relief rally following the breakthrough.”
Oil prices stabilized after rebounding from four-year lows in commodities,
supported by the same positive sentiment that swept global markets.
Trump’s Statements Drive the Rally
Markets Rallied After Tariff Freeze, triggering a historic buying wave on Wall Street—
the strongest since the 2008 financial crisis.
Less than an hour before Trump’s address, a $39 billion auction of 10-year
U.S. Treasuries saw strong demand despite concerns about declining foreign interest due to trade tensions.
Markets surged just hours after Trump urged investors to remain calm and keep investing,
writing on social media: “This is a great time to buy.”
His remarks came amid financial market turbulence, widening credit spreads,
and pressure from billionaire allies calling for a rollback of the tariff policy.
Conditional Optimism and Goldman Sachs’ Shift in Outlook
Despite the market rebound following the tariff suspension, experts remained cautious.
Many warned that the optimistic sentiment might be premature.
Although the tariffs have been paused, they still cast a shadow over corporate planning and have strained global economic relations.
Mark Hackett from Nationwide commented:
“The 90-day truce is a positive indicator of negotiation progress,
but it doesn’t necessarily mean we’re past the crisis. Discipline and caution are essential now.”
In a notable shift, Goldman Sachs retracted its previous prediction of a U.S. recession following Trump’s decision to pause tariffs.
The research team led by Jan Hatzius wrote in a Wednesday memo:
“We previously forecasted a recession as a base case due to the new tariffs taking effect.
However, following Trump’s suspension, we now return to a no-recession scenario.”
Neil Dutta from Renaissance Macro Research added:
“While there’s some relief now, it may be temporary. That’s why I currently favor bonds over equities.”
Wall Street Sees Historic Buying Since 2008
Trump’s announcement triggered a historic buying wave on Wall Street—the strongest since the 2008 financial crisis.
As markets hovered on the edge of a bear market, the S&P 500 surged 9.5%,
reversing severe recent losses amid fears of a trade war and economic slowdown.
The Nasdaq 100 also gained 12%, driven by relief following four intense trading sessions.
Most stocks in major U.S. indices rose.
According to Bloomberg, trading volume exceeded 30 billion shares
with a total value of over $1.5 trillion—the highest since the 2008 crisis.
Bond Market Recovers Alongside Risk Assets
U.S. Treasury bonds regained balance as investors shifted away from safe havens toward higher-risk assets amid signs of recovery.
Two-year Treasury yields temporarily rose above 4%,
reflecting reduced expectations of Fed rate cuts this year.
Trump indicated that the elevated “reciprocal” tariffs would be suspended for 90 days while maintaining the 125% rate on China.
There were also signs that certain companies might receive tariff exemptions.
Cautious Optimism Amid Conflicting Signals
Although optimism followed Trump’s decision, analysts warned against overinterpreting the rally as a turning point.
Tariffs remain a drag on global business and economic cooperation.
Trump reassured markets again via social media: “This is a great time to buy,”
and later added, “The bond market is beautiful.”
His remarks came after significant volatility in credit markets and lobbying from billionaire allies.
Oversold Levels and Fragile Recovery
Amid the developments, U.S. stocks reached oversold levels not seen since the peak of the COVID-19 pandemic.
Traders began looking for signals of a market bottom. Ellen Hazen of FL Putnam noted:
“I haven’t seen this level of volatility in a long time. Some stock moves are unbelievable.
The market was under intense selling pressure—any positive news was enough to spark a surge.”
Still, conflicting signals persist. Even after declines on Monday and Tuesday,
unverified rumors of tariff delays—including a fake social post
sent the S&P 500 up 7% in one-morning session, highlighting the market’s sensitivity.
Daniel Skelly of Morgan Stanley warned:
“This is the first real break in the trade war clouds, but it’s too early to declare a brighter future.
Ninety days is not enough to resolve the crisis.”
He added: “Suspending tariffs doesn’t mean it’s over, and market volatility won’t disappear overnight.”
Chris Zaccarelli of Northlight Asset Management said attention should now turn to the cumulative toll of the tariff policy:
“If tariffs are eased or canceled, markets will respond positively.
But with such rapid news cycles, long-term planning and investing in quality companies is the better path.”
Conclusion: Cautious Optimism, But The Journey Isn’t Over
In conclusion, the markets are clearly recovering after the tariff freeze,
but this recovery remains fragile and temporary, awaiting long-term solutions.
Unless U.S. trade policy shifts to a stable strategic approach,
the relief may not last, especially with the continued tariffs on China and the risk of a global recession.
Markets Rallied After Tariff Freeze