Trump Pauses Tariffs for 90 Days — Markets Rally, Recession Risks Recalibrated

April 9, 2025 – In a dramatic pivot from his earlier hardline stance, President Donald Trump has announced a 90-day pause on reciprocal tariffs for most countries, slashing the universal rate to 10% in a bid to spark bespoke trade negotiations. But the real kicker? China’s tariff rate has been cranked up to a staggering 125%, sending a clear message: this administration isn’t backing down from confrontation—it’s just redirecting its firepower.

What’s Actually Happening?

Let’s break it down. Trump’s newly announced policy hits pause on the previously proposed reciprocal tariffs that had rattled markets and business leaders worldwide. Under this pause:

According to Treasury Secretary Scott Bessent, this is a deliberate strategy to open the door for individual trade negotiations. China’s exclusion is being framed as a response to "retaliatory measures and disrespect for global markets." A bold move—and one that carries serious macroeconomic implications.

Markets React: A $6 Trillion Rollercoaster Turns Rally

Before the announcement, U.S. equities were reeling. A two-day crash had wiped $6 trillion in market value, and S&P 500 losses since mid-February had slashed $104,000 off the average retirement account, according to Senator Chuck Schumer. But post-announcement? Relief flooded the market.

• S&P 500: 🚀 +6.09%, closing at 5,286.25
• Previous Close: 4,982.77
• Day’s Range: 4,948.43 – 5,381.55
• Volume: Over 3 billion trades

Gold, oil, and even cryptocurrencies joined the surge. Even Trump Media (DJT) shares climbed after Trump’s now-viral X post:

“BE COOL! THIS IS A GREAT TIME TO BUY!!!” – @realDonaldTrump

The takeaway? Risk-on behavior is back, and investors are hoping the tariff pause signals more strategic clarity.

Investor Confidence: From Panic to Possible Stabilization

Just days ago, investor sentiment was at rock bottom. Bill Ackman warned of an "economic nuclear winter," while JPMorgan CEO Jamie Dimon cautioned tariffs could raise consumer prices and spark a recession.

Now? The narrative’s shifting. While we don’t have specific investor sentiment index numbers yet, the market’s broad rally and commentary from Treasury officials suggest we may be entering a window of cautious optimism.

Recession Watch: Goldman Sachs Pulls Back the Alarm

Goldman Sachs had already moved to a recession baseline forecast thanks to the tariff chaos. But after Trump’s pause?

• Revised Outlook: No recession
• 2025 GDP Forecast: +0.5% (Q4/Q4)
• Core PCE Inflation: Peak at 3.5%
• Recession Odds: Down to 45%
• Fed Rate Path: Projected 3x 25bps cuts (June, July, September)

That’s a significant recalibration. But it comes with asterisks: Walmart has already pulled its Q1 operating income guidance, citing tariff-related uncertainty. And with Europe sliding into its own trade panic, retaliation may still be on the horizon.

Geopolitics in Play: Why China Is the Exception

Exempting China from the tariff pause is more than a negotiating tactic—it’s a geopolitical signal. The 125% rate isn't just economic punishment; it’s a message about the rules-based order, trade compliance, and the U.S.'s strategic patience—or lack thereof.

As White House Press Secretary Karoline Leavitt put it, China’s exclusion reflects “an unwillingness to participate in good-faith negotiations.” The bigger question: Will Beijing retaliate? If they do, it could ignite a tit-for-tat that drags the global economy back into volatility.

What Comes Next?

Trump’s move has bought 90 days of calm—but also 90 days of uncertainty. Negotiations will likely play out behind closed doors, and it’s unclear whether the universal 10% tariff will remain, escalate, or disappear altogether. With election season heating up, this pause could also be a campaign tactic dressed in policy clothing.

Final Thoughts: Strategic Reset or Temporary Sugar High?

Markets have clearly welcomed the pause. Investors are exhaling. Recession odds are down. But we’re still in high-stakes territory, especially with China staring down 125% tariffs and Europe considering retaliatory steps. The long-term effectiveness of Trump’s move will hinge on how negotiations evolve, whether tariffs become permanent, and how businesses recalibrate in the meantime.

So here’s the question:

Is this 90-day tariff pause a smart strategic reset—or just a temporary sugar high masking deeper trade dysfunction?