Trump’s tariff pause

What happened?

For the past several weeks, we’ve written about the potential for a tariff reversal from President Trump—what some in our industry have dubbed, the “Trump Put.” On Wednesday at 1:18 p.m. ET, by Truth Social post, President Trump did just that—partially reversing his April 2 reciprocal tariff announcement by way of a 90-day pause on tariffs above the universal 10% rate for all countries, except China. The retaliatory tariffs on China will be expanded to 125%, as that bilateral trade war escalates.

Whether the temporary reversal was caused by stocks falling into a bear market, global business leaders’ vocalized fear of recession, or the past few days’ sharp upward move in interest rates, we cannot tell. In all likelihood, all of those reasons played a role. But for investors, the pause catalyzed a near 10% rally in US stocks by the end of the day.

Where does this leave us?

Even with this reversal, the current effective tariff rate appears as though it will be in the mid-teens. Recall that we began the year with an effective tariff rate near 3%. That effective rate would be higher; however, tariffs on China are now so restrictive that we expect those imports to collapse (with trade to be rerouted throughout Southeast Asia). We should also note that many still expect incremental sectoral tariffs to come that have not yet been announced on pharmaceuticals, semiconductors, copper, and lumber.

And while Wednesday’s announcement provides some respite, economic and trade uncertainty remains extremely high. Corporate and consumer planning are likely to remain challenged. To be sure, the economic landscape is murkier today than it was just nine days ago. For that reason, we won’t materially change our economic forecasts. We still think US economic growth comes in below 1% this year and that inflation approaches 4% over the next 12 months.

Market implications

As we’ve reiterated all year, the best approach to navigate the ongoing economic and market uncertainty is to be diversified, across both equity and fixed income, and public and private markets. This latest upswing is just another reminder that markets can recover just as quickly, or even more quickly, than they fall. Market timing and meaningful de-risking once already in a downturn can add further risk to portfolios and create more challenges in achieving an investors’ financial goals. We remain steadfast in our objective to be sound stewards of our client’s capital, despite the periodic challenges presented to the economy and financial markets.