Stock markets soar but uncertainty remains 'sky-high' amid Trump tariff pause

A little over 48 hours after the White House resoundingly quashed the idea of a delay to the levies, President Trump announced that US tariffs above 10% would be postponed by 90 days for most countries, with the notable exception of China, which had its total additional tariffs hiked to 125%, from 104%.

Market participants rejoiced in the hope that the delay will allow room for negotiation, compromise and an ultimate softening in the tariffs that would limit the global economic fallout. Clearly there are no guarantees with Trump, but this seems increasingly likely (markets obviously believe that it is).

It feels incomprehensible that the tariffs would remain in place at such devastatingly high levels given the profound implications for the US economy, which would almost certainly be staring down the barrel of recession - not exactly a black mark that the 47th President would want tarnishing his legacy.

Stock markets have led the gains, with US equity indices posting double digit gains - the Nasdaq Composite astonishingly ended more than 12% up, its largest rally since January 2001 and the second largest on record.

The safe-havens have reversed some of their gains in FX, namely the yen and the franc, and the dollar has recouped ground on the euro, which emerged as a surprise quasi safe-haven last week.

Spare a thought for the poor old Chinese yuan, however, which continues to languish at 18-year lows on the dollar. In this instance, retaliation from Chinese authorities appears to have backfired, and an agreement here appears more challenging than ever.”

Uncertainty remains sky-high, and the fact that key policy decisions are seemingly being made almost entirely off the cuff (Trump’s top trade official was reportedly unaware of the delay until after announcement) is a bit unnerving.

Yet, risk assets (CNY proxies aside) will probably remain well bid in the next few days, as markets continue to readjust expectations for where the average US tariff rate will land. Again, there are no guarantees here, but the fact that Trump appears open to negotiation suggests that this number is almost certain to come down from current levels, to the relief of market participants.