US markets continued to rally at an incredible pace on Wednesday. They rebounded big when news leaked that there would be a 90-day deferment on actually putting in those new higher tariffs. In the State of the Union address, President Donald Trump introduced a new “universal 10%” tariff. This modification would apply to nearly all countries, representing a change from the administration’s generally combative posture towards trade relations.
During the most recent, yet paralleling record-breaking rally, the S&P 500 index jumped by 9.5%—its biggest single-day gain since 2008. Today, the markets staged a major comeback following a few days of rollercoastering. This disorder was largely driven by the yet-to-happen imposition of tariffs and escalating trade war with China. The chaos started in earnest when President Trump decided to slap on even higher tariffs. His administration attributed this unprecedented response to China’s “refusal to back down.”
The Trump administration has justifiably responded in kind to several of China’s recent actions. They retaliated with high tariffs of their own, targeting specific products with a staggering 125%. These events had already triggered unprecedented ripples across global markets and financial systems, leaving uncertainty and volatility in their wake. The surprise suspension of the program on Wednesday has created a wave of hope among investors.
These market analysts witnessed a surprising short-lived bullish rally. They think this increase was fueled by the expectation that the cessation of tariffs might allow for more fruitful negotiations to take place between the United States and China. Hoping for the chance of lessened hostility, investors jumped on board, driving stock prices up more than 200%.
The Trump administration’s recent round of tariff changes are indicative of a bigger approach to level the playing field and put America first. The sudden escalation of tariffs is creating more uncertainty for businesses and consumers. Like consumers, producers fear increases in prices and a recession.