Tariffs and Market Mayhem: Decoding Trump’s Pause

On April 9, President Trump made headlines by announcing a 90-day pause on the higher-tier reciprocal tariffs, a move which inevitably led to a certain degree of clarity among investors. But to be clear, this suspension did not mean removing these tariffs entirely. The baseline 10% tariff, which had been in effect since April 5, remains in place.

Even so, the reaction was electric, to say the least:

The S&P 500 skyrocketed nearly 10%, its biggest one-day jump since 2008. The Dow Jones Industrial Average climbed around 8%, while the Nasdaq soared 12%, which represents its largest day gain since January 2001. 

Yet this market euphoria was short-lived. In the days that followed, uncertainty returned, and indexes swung unpredictably as investor confidence began to falter once again. But what exactly happened? What caused this sudden shift in Trump’s mood?

Let’s start by taking a closer look at the latest economic data to understand how America is really doing.

To understand the market’s shifting mood, we need to zoom in on the economic fundamentals — starting with inflation. 

U.S inflation is currently moderating. In March 2025, the Consumer Price Index (CPI) increased by 2.4 % year-over-year, down from a 2.8% in February, marking the lowest annual inflation rate since September 2024. On a monthly basis, prices declined by 0,1%. In short, we’re inching closer to the Fed’s 2% target :a key signal of cooling inflation.

While consumer prices show signs of easing, it’s just as important to track inflation further back in the supply chain. The Producer Price Index (PPI) ,which measures what businesses pay for goods and services before they reach consumers, offers another crucial view of inflationary pressure.

 We have witnessed the largest monthly drop in producer prices since October 2023 with March PPI monthly rate being at -0,4%. This decline was primarily driven by a 0.9% drop in goods prices, with energy prices falling by 4.0% and food princess decreasing 2.1%. Notably, gasoline prices plunged 11,1%. Overall, this indicates a slowdown in producer price inflation, which could in turn eventually influence the Fed’s decision-making.

At the same time as inflation data and the budget deficit have painted a mixed picture of the economy, another important indicator shows a more optimistic side. Retail sales have risen 1.4% in March, which shows that consumers are still spending, therefore signaling economic resilience among recession fears. It is the largest increase since January 2023.

However, when automobile sales are excluded, the increase drops to just 0.5%, signaling that caution is needed. This may simply indicate early consumption, with people making purchases in advance due to expectations of rising prices.

While some economic indicators show signs of slowing, the financial sector is experiencing a different dynamic. JPMorgan Chase stock traders earned record revenues in this first quarter, with their stock market revenue rising 48%. This can be attributed to the current market volatility which is a direct result of Trump’s bold and unpredictable policy moves. 
Overall, there are mixed signals regarding the strength of the U.S. economy. However, one factor that continues to weigh heavily on economic outlooks is the ongoing trade war. The EU and the US have made minimal progress in resolving their trade disputes, while the trade war with China continues, with Trump imposing a 145% tax and China retaliating with a 125% tax.

Now, regarding my favorite stock, Nvidia, it has certainly faced significant challenges recently, to put it mildly. Its shares were hit hard as the US government restricted exports of H20 chips to China, falling more than 6% in after-hours trading. These restrictions stem from concerns about China’s rise in the electronics sector. 

To conclude our overview of the current economic data, it’s worth noting that the S&P 500 is down by 8% year-to-date.

Now, back to Trump’s policy: as we all know, he brought tariffs down to their baseline of 10%. However, his entire tariff strategy is far from monotone. Unsurprisingly, as I’ve mentioned before, tariffs on China remain at astronomical levels. I still can’t quite tell where this hostility toward the nation stems from. It almost feels like we’re in a modern-day Cold War ,except instead of a nuclear arms race, it’s all about electronics.

Speaking of electronics, those imported into the United States will be exempt from President Trump’s reciprocal tariffs, according to a U.S. Customs and Border Protection notice posted last Friday. In addition to electronics, it appears automobiles might also be exempt. On Monday the 14th, the U.S. government signaled a temporary exemption for tariffs on imported cars and parts, which directly boosted automakers’ stock prices. However, this exemption is neither permanent nor official — it remains under consideration. If the original 25% tariff were to be imposed, it would likely result in higher prices and squeeze consumer demand, with Americans potentially facing an additional $30 billion in costs.

But the real question here is why? Why this sudden shift in policy?

There are two possible scenarios here, so allow your economic insider to walk you through each one.

So yes, the White House claims that all of this is part of a broader strategy to revive the U.S. industrial base and bring back jobs. But to some, like Chris Murphy from the Financial Times, these actions don’t reflect a coherent modern economic policy. Rather, they seem like a way to make companies, and entire industries,  loyal to our dear President Trump.

Of course, there’s no denying that tariffs, when implemented wisely and paired with a solid domestic industrial strategy, can be hugely beneficial. But let’s not lie to ourselves: in this case, they are being used not just excessively, but chaotically. They are the apex of inflationary pressures, and they threaten not only the American economy but the global one too.

Here’s the point: it seems like Trump is intentionally creating havoc, so that big industrial players come running to him for relief. Someone here clearly wants the world at his feet.

At first , even if excessive, one could believe these tariffs were about helping the American people,and that they were just implemented in a misguided and overly loud way. But this recent pause proves otherwise. It’s no longer about making America great again.

Take Apple, for example. The exemption of electronics from tariffs came directly after strategic discussions between CEO Tim Cook and the Trump administration. It’s not hard to imagine other chief executives lining up at the White House door right now.

This is the pinnacle of selfishness. And there are other signs supporting this ideology like the administration’s cuts to university funding and increasing pressure on journalists. Academic research that contradicts Trump’s views is reportedly being threatened. Are we heading toward a dictatorship?

On the other hand,some would argue that Trump’s decision to pause the tariffs was driven by the overall reaction to his initial announcement of reciprocal tariffs. At the time, investors weren’t just dumping stocks, they were also offloading U.S. Treasuries. And it’s no secret that at the core of Trump’s economic strategy lies the goal of refinancing national debt at a cheaper cost. But that can only happen if interest rates are low (people dumping their Treasuries inevitably spike interest yields).

With the Federal Reserve refusing to cut rates, Trump’s only alternative was to encourage more demand for Treasuries , more people buying government bonds , so that, according to the law of demand, yields would fall. But when the bond market reacted negatively and yields started climbing, that plan was suddenly in jeopardy. This hostile reaction from the bond market might explain why Trump hit pause, a strategic move to regain control over interest rate dynamics.

However, this reasoning has its flaws. Let’s imagine the Fed had reacted. Given the inflationary pressures triggered by the tariffs, their response would likely have been to raise interest rates — not lower them. (Just to clarify: they haven’t done this yet, largely because employment levels and the labor market remain strong and on the right track ,a point I actually agree with.)

But here’s the irony: if the Fed had hiked rates, that would’ve likely tanked the stock market, sending investors running back into Treasuries , which would, in turn, drive yields down again. So in effect, Trump would be pushing the Fed to do something counterproductive to his actual goal: lowering interest rates.

 At the end of the day, this pause overall doesn’t seem to be about helping the average American consumer or reviving U.S. industry in a meaningful way. It feels more like a power play , one that could carry consequences far beyond the stock ticker and not only impact the U.S. As investors, businesses, and citizens alike try to make sense of it all, one thing is certain: clarity definitely remains in short supply. In the midst of all this, it is important to focus on the Fed’s tapering timeline and the resilience of corporate earnings.