Tariff Seesaw

China announced new retaliatory tariffs of 84% against US imports early Wednesday in response to the Trump administration’s 104% tariff on Chinese imports. The escalation came as Trump announced a 90-day pause on most tariffs over 10%—excluding China—later in the day, sparking markets to historic rallies. Trump also increased China’s tariffs to 125%.

The tariff pause came amid warnings from economists—including JPMorgan CEO Jamie Dimon—that the broad tariff program would lead to a recession (tariffs 101). Since last week’s announcement of increased tariffs on more than 75 nations, the S&P 500 had entered bear market territory, having shed nearly 20% off its recent high, while all US-listed stocks dropped $7.7T in value. 

Stocks popped on the reversal (S&P 500 +9.5%, Dow +7.9%, Nasdaq +12.2%), with the S&P 500 notching its biggest single-day gain since 2008. 

In related news, Richmond Fed President Tom Barkin said yesterday that price hikes from tariffs may not arrive until the summer as companies work through existing inventory. See how tariffs are implemented here.