Markets Rally After Trump Pauses Tariffs

Markets jumped. But not because things got better—just because they got less worse. In classic fashion, Donald Trump reversed course on his own tariffs less than 24 hours after triggering a global market crash. The result - a relief rally, not grounded in fundamentals, but in fatigue and short-covering. For traders, this wasn’t policy - it was panic management disguised as strategy.

Tariff Pause? Not Really - The Real Damage Remains

Trump’s sudden announcement to “pause” his new tariffs came just after markets suffered their worst selloff since COVID began. Treasury yields soared. Trillions were wiped out in stocks. And within hours of the chaos, the president flipped the switch and lifted tariffs for dozens of countries, but not all.

A 10% blanket duty still remains on most U.S. imports. China got hit harder—tariffs rose from 104% to 125%. Canada and Mexico? Still face fentanyl-related penalties if USMCA rules aren’t met. The so-called pause is full of loopholes. Tariffs on cars, steel and aluminum remain intact. The market has interpreted this as a rollback, but it is more of a political stunt than a retreat.

Markets Rise on Shock

The S&P 500 soared 9.5%, and Japan’s Nikkei rallied 8% on Thursday. A classic relief rally? Yes. A fundamental shift? No.

"Markets weren’t responding to better conditions—they were responding to less pain," one analyst said. “That’s not bullish. That’s desperation.” 

Asian futures extended the gains, but U.S. stock futures began fading—signaling traders are already questioning the sustainability. Oil dropped another 1% as fears of recession, not recovery, lingered. Even Goldman Sachs only dialed recession odds back to 45%—still elevated. That speaks volumes about what institutional money thinks of this bounce.

Trump vs. China

Treasury Secretary Scott Bessent claimed the chaos was "the plan all along." Trump called it “being flexible.” But the pattern of triggering crisis, then partially walking it back is becoming trademark.

“You have to be flexible,” Trump told reporters. Translation: the market blinked, so he backed off - except China.

China, already hit with 84% reciprocal tariffs on U.S. goods, is reeling. Sellers on Amazon are considering raising prices or exiting the U.S. market altogether. And Beijing isn't folding—it’s now holding talks with the EU and Malaysia to strengthen non-U.S. trade ties. Australia declined a Chinese Initiative. But the broader message is clear: China’s playing the long game, while Trump tries to win the next headline.

Tariffs Are Still Killing Demand

Even before the walk-back, surveys showed slowing business investment and household spending due to tariff fears.

Meanwhile, the Chinese yuan fell to its weakest level since the 2008 crisis, and foreign governments like Canada and Japan are now hinting they’ll step in to stabilize markets if the U.S. won’t.

The Fed? Don’t expect rate hikes into this instability. If anything, the next few Fed speeches might tilt dovish—not because inflation has dropped, but because political chaos has become the new volatility driver.

What Traders Should Watch Next

If you’re trading this bounce, treat it like what it is: a tradable oversold reaction—not a regime shift. The structural damage is still in play, and policy remains reactive, not strategic.

• SP 500: Watch the 4,900 resistance zone. A fail there, and the bounce fizzles.
• USDCNH: Above 7.50, expect another wave of risk-off.
• Gold: Could regain safe-haven flows if China retaliates further.
• Oil: Remains vulnerable—especially if recession fear returns.

Don’t Mistake the Bounce for a Breakthrough

Markets don’t rally on policy strength—they rally on policy weakness when chaos takes a breather. That’s what this is. A breath, not a fix. Trump’s tariff whiplash is a trader’s environment, not an investor’s one. Stay nimble. Stay skeptical. This story’s not done—but the damage is already underway.