Trump's tariff turn sends stocks soaring amidst China challenge

The President of the USA announced on Wednesday evening that he is raising tariffs on China to 125%, but suspending tariffs for other countries for 90 days. The American stock market reacted immediately. Investors greeted this decision with enthusiasm.

The S&P 500 index gained 7% to over 5,300 points, marking the largest single-day increase in the index in the past five years. Meanwhile, the Dow Jones Industrial Average rose by 5.7%. For this index, it is also the largest increase since 2020. The Nasdaq Composite gained 8.8%.

On the American stock exchange, shares are rebounding for companies that previously suffered the most as a result of the trade war initiated by Donald Trump. Apple is up by 7%, Nvidia by 10%, and Walmart by 9%.

"Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately," Trump wrote in a post on his social media platform Truth Social.

"Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately," he added.

Thus, the information from Monday, which the White House quickly denied as a rumour, turned out to be true. Two days ago, foreign services, including Yahoo Finance, Times of Israel, or Economic Times, reported via the Reuters agency that Trump was considering a 90-day break on the introduced tariffs, except for China. And although this information "lived" for only 7 minutes, it was enough to trigger a surge in the markets.

A few hours earlier, Trump wrote on Truth Social: BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!"

This post appeared at the moment of the stock exchange opening on Wall Street. In another post, he stated: "This is a great time to buy!" He repeated the rhetoric from a few days ago, which was intended to calm investors' nerves.

"My policies will never change," Donald Trump wrote to investors last week. In this way, the President of the USA encouraged investment in the United States after announcing high tariffs on goods from around the world. Meanwhile, Vice President Vance believed that "one bad day in the stock market and (...) we're going to have a booming stock market for a long time because we’re reinvesting in the United States of America."

Representatives of the President's administration sent conflicting signals on Wednesday and Thursday regarding the possibility of potentially removing tariffs through negotiations with other countries. Commerce Secretary Howard Lutnick himself said on the same day that there was no chance of Trump abandoning tariffs, only to later suggest that the President is open to negotiations.

And although Trump's post injected a lot of optimism into the American stock market, analysts are tempering these sentiments. Sam Stovall, chief investment strategist at CFRA Research, pointed out that Trump's decision opens the door to at least short-term growth, but he cautioned against assuming that the market has already hit bottom. He emphasized that repeatedly falling for the same situation reflects poorly on investors' judgment.

CNBC notes that concerns related to the introduction of tariffs caused four days of stock price declines. Over the course of the previous four trading sessions, the Dow dropped by more than 4,500 points, the S&P 500 declined by 12%, and the Nasdaq Composite saw a decrease of over 13%. Such steep losses had not been recorded since the pandemic.