The US stock market has seen a dramatic rise after President Donald Trump announced a 90-day pause in increased tariffs on all countries that have not imposed countermeasures against the United States.
Wall Street’s benchmark index, the S&P 500, rose almost 6 percent immediately after the announcement, putting it on track for its biggest daily gain since April 2020. The tech-heavy Nasdaq Composite jumped as much as 7.7 percent, recording its best day since March of that year. The Dow Jones industrial average rose more than 2,000 points, or 6.1 percent.
The decision to suspend tariffs comes after China imposed an 84 percent tariff on US products earlier in the day, sparking a new round of trade tensions.
Trump then announced on social media that tariffs on China would be increased to 125 percent, but that the rest of the world would be temporarily spared additional levies.
“Based on the lack of respect that China has shown for world markets, I am hereby increasing the tariffs that the United States is charging China to 125 percent, effective immediately,” Trump said.
He added that more than 75 countries have requested negotiations on the tariffs previously imposed by Washington.
“I have authorized a 90-day PAUSE and a significantly reduced reciprocal tariff of 10 percent, also effective immediately,” the former president said.
The market reaction was immediate. Shares of the largest American companies recorded huge gains.
The total market value has risen by more than $3.5 trillion, according to Wall Street analysts.
Karl Schamotta, chief market strategist at Corpay, called it a “capitulation to pressure from financial markets and Trump donors.” He added that the administration had to give in under pressure to avoid further market destabilization.
Economists now see a reduced likelihood of a rapid rate cut by the Federal Reserve. Market participants now expect three to four cuts this year, with the first in July, compared with previous forecasts that suggested the first cut as early as June.
“If the trade war is limited to the US and China, that means relief for other countries and the global economy,” said Eric Winograd, chief economist at Alliance Bernstein.
