In a dramatic move, the Trump administration announced yesterday that it would implement a 90-day pause on all its new tariffs over 10%, except for China which now faces a 125% tariff, sending stock markets soaring with huge gains.
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It was another very dramatic day in the markets, especially in the stock markets, as the Trump administration, after facing huge pressure and even threats from Congress to derail Trump’s control of tariffs, announced it would pause the implementation of all tariffs over 10% (all specific new tariffs) for 90 days, except for China which was immediately hit with a 125% tariff after it raised its tariff on US imports to 84%. The US Treasury secretary announced that negotiations were already underway with several major Asian trading partners such as Vietnam, India, and Japan. It seems clear now that a 90-day period of negotiations will take place that will reshape the terms of global trade centered on the USA.
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Stock markets rallied dramatically on the news, especially in the USA, with the NASDAQ 100 Index ending the day 12.02% higher and the S&P 500 Index closing up by 9.52%. In Asia, stock markets have also risen dramatically today, with the Nikkei 225 Index up by 9.13% and even the Chinese HSI up by 2.95% despite the new 125% tariff. These are historic daily changes, some of them have not been seen since 2008/2009 during a major global financial crisis.
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Commodity markets have also seen gains since the US tariff pause was announced. Gold is again rising to approach its recent record high price for the second consecutive day, Steel, Cocoa, Copper, Lumber and WTI Crude Oil are all up by between 6% and 10%.
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In the Forex market, a strong risk-on move has also been seen, with the New Zealand and Australian Dollars the major beneficiaries, while safe havens such as the Swiss Franc and the Japanese Yen are weaker. The US Dollar is not doing very much so it is a bit of a sideshow right now, which much more action in the big currency crosses such as AUD/CHF. The EUR/USD currency pair remains in a valid long-term bullish trend.
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Short-term US Treasury Yields also gained strongly yesterday, as if there is progress negotiating away the new tariffs, the market thinks that the Fed will want to keep rates higher for longer. The CME FedWatch tool now shows markets are expecting 3 rate cuts over 2025 totaling 0.75%, down from 4 totaling 1% before the pause was announced yesterday.
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Bitcoin made a firm gain yesterday, but it was less dramatic than the gains made by many other risk assets, and technically the price action is still stuck within the bearish pattern shown over the last several weeks.
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There will be a key data release later today of US CPI (inflation), which is expected to fall from an annualized rate of 2.8% to 2.6%. A lower than expected rate could boost US equity indices, while a higher than expected rate could see the US Dollar gain.
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There will also be a release of US Unemployment Claims data.
