President Donald Trump has announced a reversal on his aggressive trade policies and threats to remove Federal Reserve Chair Jerome Powell, leading to a surge in the stock market. The Dow closed higher by 420 points, or 1.07%, while the broader S&P 500 gained 1.67%, and the tech-heavy Nasdaq Composite rose 2.5%. The three major indexes rallied but finished below their highest levels of the day, as initial morning gains eased after comments from Treasury Secretary Scott Bessent about the lengthy timeline required to rebalance trade with China.
Top administration officials expressed relief after Trump’s statements on Tuesday in the Oval Office, clarifying his stance on Powell and tariffs. The officials had been worried that prolonged uncertainty could lead to financial chaos. Trump’s newfound cautious tone came a day after a crucial meeting with chief executives from Walmart, Target, Home Depot, and Lowe’s.
These retail giants voiced their concerns over the economic impacts of the ongoing trade war with China. Doug McMillon, CEO of Walmart, directly conveyed to Trump that the trade war was already affecting the supply chain and would likely worsen by summer. This meeting underscored the real-world implications of Trump’s policies, prompting the administration to reconsider its aggressive stance.
Treasury Secretary Scott Bessent played a critical role in facilitating the dialogue between Trump and the retail executives.
Trump’s cautious policy shift boosts market
His remarks about the lengthy timeframe for rebalancing trade between the U.S. and China tempered market enthusiasm but highlighted the administration’s recognition of the complex trade landscape.
White House Press Secretary Karoline Leavitt stated on Fox News that there would be “no unilateral reduction in tariffs against China,” reinforcing the administration’s negotiation approach. She expressed optimism about reaching a trade deal but reiterated that tariff decisions would ultimately be up to the president. U.S. Treasury bonds initially rallied before reversing their gains, reflecting market volatility amid the uncertainty.
Federal Reserve Chair Jerome Powell reiterated that any decision to modify interest rates would be made carefully, countering Trump’s earlier calls for immediate rate cuts. Trump’s notable change in tone towards Powell and trade policies followed consistent caution from his economic team. Despite earlier aggressive remarks on social media, the president seemed to heed advisory warnings, which had been a source of market anxiety.
White House Chief of Staff Susie Wiles and senior advisers had received numerous alarming calls from business leaders concerned about the economic fallout from the tariffs and the uncertainty around Powell’s position. These interactions contributed to a more measured approach from Trump. While challenges remain, particularly in rebalancing trade with China, the administration’s engagement with business leaders and key economic advisories suggests a more cautious future approach.
With ongoing negotiations and market reactions, the delicate balance between aggressive trade policies and economic stability continues to unfold.