The stock market rallied Monday as investors reacted to reports that President Donald Trump’s tariffs might be more targeted and less sweeping than initially anticipated. For more than a month, the administration has been promoting significant tariffs on various imports. However, they now appear to be scaling back those plans.
Instead of a comprehensive set of tariffs, a significantly reduced batch will be announced next week, with more potentially following later. The situation remains fluid and subject to change. Following a Cabinet meeting Monday, Trump hinted that tariffs on a variety of products would be announced in the “very near future.” Later that afternoon, he added that some countries might receive breaks from the tariffs.
This back-and-forth created more uncertainty about the administration’s trade policy plans heading into April. The Dow closed higher by 598 points, or 1.42%. The broader S&P 500 rose 1.76%, and the Nasdaq Composite gained 2.27%.
Trump had originally declared next Wednesday to be “Liberation Day,” promising massive reciprocal tariffs that would match foreign countries’ import taxes dollar for dollar. He also proposed implementing 25% tariffs on all goods imported from Mexico and Canada and additional tariffs on a wide variety of other goods. However, reports suggest that these product-specific tariffs will not be enacted on April 2.
It remains uncertain whether the 25% tariffs on Mexican and Canadian goods will take effect or be further postponed. A White House official said that no final decisions had been made, and tariffs on various sectors might or might not be announced on April 2.
Stocks rally on softened tariff stance
Reciprocal tariffs are still expected to go into effect soon, possibly limited to a dozen or so countries labeled the “Dirty 15” by Treasury Secretary Scott Bessent for their unfair trading practices. These countries include Australia, Brazil, Canada, China, the European Union, India, Japan, South Korea, Mexico, Russia, and Vietnam. While these tariffs could cover a large portion of goods coming into the United States, the targeted approach represents a significant pullback from the more extensive tariffs Trump had promised.
Trump indicated that any delayed tariffs wouldn’t be postponed for long. He emphasized the need for the US to produce more steel, pharmaceuticals, and aluminum domestically. Tariffs on cars, he suggested, could come first, with an announcement on that front coming “very shortly.”
The administration had been setting the stage for a rollback of tariffs for several days.
Trump hinted at “flexibility” on tariffs, a departure from his earlier stance of no exemptions. Negotiations are ongoing, with Mexico, Canada, and the EU potentially delaying their retaliation against US tariffs as discussions continue. In addition to the international trade dynamics, Trump announced tariffs on countries purchasing oil from Venezuela.
Despite these announcements, US markets continued to build on the day’s rally. The yield on the 10-year Treasury rose to 4.33%, indicating investor preference for riskier assets like stocks. The Cboe Volatility Index, or VIX, slid more than 8% to its lowest level this month, signaling improving sentiment on Wall Street.
Nevertheless, Trump’s on-again, off-again tariff approach is creating volatility and uncertainty for investors, businesses, trading partners, and consumers. Negotiations and potential tariff increases remain in flux, with the administration’s trade policy strategies continuing to evolve.
