Stocks bounce back as Trump eases tariff measures

NEW YORK – In an encouraging turn for the U.S. stock market, equities surged on Wednesday as President Donald Trump announced a temporary reprieve on some tariffs. This move has rekindled optimism on Wall Street, with investors hopeful that Trump might steer clear of a full-blown trade war that could potentially stifle economies and drive inflation upwards.
The S&P 500 saw an increase of 1.1%, recovering from a downturn that had wiped out all of its gains since the election, often termed the “Trump bump.” Meanwhile, the Dow Jones Industrial Average rose by 485 points, or 1.1%, and the Nasdaq composite jumped by 1.5%.
The significant market upswing followed Trump’s decision to grant U.S. automakers a one-month exemption from new, stringent tariffs on Mexican and Canadian imports. This proclamation came on the heels of discussions with Ford, General Motors, and Stellantis, which owns Chrysler. Such tariffs threatened to impact the Big Three automakers due to the extent of their manufacturing activities spread across these North American countries. Consequently, Trump’s announcement was met with relief on Wall Street, pushing Ford and General Motors shares up by over 5%, contributing to a broad market rally.
The concern surrounding these tariffs was not only about potential profit losses for companies but also the prospect of increased vehicle prices and household expenses in the U.S., a nation already grappling with high inflation. There is hope that Trump’s tariff threat acts as a negotiating tactic, potentially leading to less detrimental policies for domestic and global trade if he secures what he demands.
Notably, Trump hasn’t rescinded all tariffs against the United States’ biggest trade partners, such as China. This latest move might inject further uncertainty into a market already battling similar issues. Just days ago, Trump had declared no room for negotiations to lower tariffs on Mexico and Canada, which went into effect on Tuesday and led to a sharp downturn in the U.S. stock market.
Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, remarked, “The economic impact and consumer impact is still ahead of us.” He further emphasized the unpredictability surrounding tariff duration.
Even if tariffs prove less severe than feared, their mere threat has already negatively impacted American businesses and consumers. Anticipatory inflation due to tariffs has dented consumer confidence, while businesses are struggling amidst the persistent policy changes stemming from Washington. Manufacturers in the U.S. claim their growth is nearing a halt over tariff concerns.
Two reports released on Wednesday painted a mixed picture of the U.S. economy. One indicated a significant slowdown in company hiring last month, potentially foreboding more comprehensive employment data from the U.S. Labor Department anticipated on Friday. Conversely, another report revealed that growth within U.S. finance, real estate, and other service sectors exceeded expectations, although businesses described facing “chaos” due to tariffs, according to the Institute for Supply Management.
Recent economic reports, underperforming expectations, have reignited fears of a severe condition known as ‘stagflation’ — a scenario of economic stagnation coupled with high inflation, for which the Federal Reserve lacks effective remedies.
While the U.S. economy ended the previous year on solid footing, a sharp downturn may prompt the Fed to cut interest rates to stimulate borrowing and economic activity. However, such rate cuts can push inflation higher, and any spike in everyday item prices due to tariffs could tie the Fed’s hands.
In a congressional address on Tuesday night, Trump reaffirmed his tariff plans, with more scheduled to take effect on April 2. “Tariffs are about making America rich again and making America great again,” he stated. “There will be a little disturbance, but we’re OK with that.”
Elsewhere in the market, Brown-Forman surged 10.1% after the company reported better-than-expected profits, even amidst uncertainty and external challenges. CEO Lawson Whiting pointed out the action by Canadian provinces to remove U.S. whiskeys from shelves as more detrimental than tariffs, noting it directly cuts off a sales channel. Yet, he downplayed the impact, as Canada represented only a small fraction of total sales.
On the downside, Campbells saw a 2.9% dive after revising down its financial forecasts, pointing to unfavorable trends in its snack division.
Overall, the S&P 500 advanced by 64.48 points to 5,842.63. The Dow climbed 485.60 to 43,006.59, while the Nasdaq composite rallied 267.57 to 18,552.73.
In the bond market, the yield on the 10-year Treasury climbed to 4.28% following the U.S. services industry report, a recovery from its sharp January decline.
Internationally, stock markets also experienced gains, with rises across Asia and Europe. Hong Kong rose 2.8%, South Korea saw a 1.2% gain, and France indices increased by 1.6%. German markets rallied 3.4% amid governmental partner discussions about potential fiscal flexibility and debt.
Despite Trump’s America-First stance, stocks outside the U.S. have been performing well, with the S&P 500 lagging behind in comparison.