How did US equity markets react to the newly announced tariffs?

US Equity Markets React Sharply to Newly Announced Tariffs

The US equity markets experienced a whirlwind of volatility in response to President Donald Trump’s sudden tariff policy shifts in April 2025. The announcement of a 90-day pause on reciprocal tariffs for over 75 countries—while simultaneously escalating tariffs on Chinese imports—triggered dramatic swings in stock indices, reflecting both investor optimism and deepening concerns over trade wars.

### Immediate Market Surge Following Tariff Pause

On April 9, 2025, President Trump announced a temporary suspension of reciprocal tariffs for nations that had not retaliated against US trade policies. The baseline tariff for these countries was reduced to 10%, while tariffs on Chinese goods surged from 104% to 125%. The news sparked an explosive rally in US equities:

- The **Dow Jones Industrial Average** soared by 2,962 points (7.9%), closing at 40,608—its largest single-day gain in years.
- The **S&P 500** surged 474 points (9.5%) to 5,457, marking its biggest one-day jump since the 2008 financial crisis.
- The **Nasdaq Composite** skyrocketed by 1,857 points (12.2%), fueled by tech stocks and relief over eased trade tensions with non-China partners.

### Global Markets and Cryptocurrencies Follow Suit

The ripple effects extended beyond US borders. European markets, after an initial dip, rebounded strongly:
- Germany’s **DAX** rose 7.8%.
- France’s **CAC 40** climbed 8.1%.
- The **Euro Stoxx 50** surged 7.5%.

Asian markets, particularly those dependent on Chinese trade, also recovered once the tariff pause was confirmed. Meanwhile, cryptocurrencies like Bitcoin saw sharp gains, underscoring their role as speculative assets during geopolitical uncertainty.

### Escalating US-China Tensions Spark Sell-Off

The rally proved short-lived. By April 10, 2025, markets reversed course as investors digested the full implications of Trump’s hardline stance on China:
- The **S&P 500 fell over 2%**, and the **Dow dropped 600+ points** after China vowed retaliatory measures.
- Analysts warned of prolonged trade war risks, with Trump and Chinese leaders adopting a "fight to the end" posture.

### Economic and Political Fallout

The policy shift raised alarms among economists and lawmakers:
- **Recession Fears**: Some analysts projected a 45% chance of a US recession, anticipating a 200-basis-point Fed rate cut to mitigate damage.
- **Consumer Impact**: Critics argued that higher tariffs would inflate prices for US households, countering Trump’s promises to boost manufacturing.
- **Insider Trading Allegations**: Democrats, including Senators Schiff and Gallego, demanded investigations into whether Trump’s pre-announcement social media activity hinted at insider knowledge, given the market’s extreme reaction.

### Conclusion: A Fragile Equilibrium

The US equity markets’ rollercoaster reaction highlights the fragility of investor sentiment in the face of trade policy whiplash. While the tariff pause provided temporary relief, the aggressive measures against China—and the threat of escalating retaliation—have left markets in a state of heightened uncertainty. The coming months will test whether the 90-day suspension fosters stability or merely delays another wave of volatility as global trade tensions simmer.