Tariff theater cools, AI sovereignty surges, and the Fed puts its foot on the floor

Markets

After seven straight sessions of tariff-fueled whiplash, stocks bounced hard as bond carnage paused and traders digested a slightly less chaotic message from the White House.

The S&P 500 tacked on 1%, led by Big Tech and battered chip names. Apple extended its two-day moonshot to 7%, with Nvidia leading the charge across semis on the AI sovereignty bump.. Even the autos joined the party after Trump hinted at carving out exceptions for car parts from his 25% levy blitz.

Meanwhile, bonds finally stopped bleeding — the 10-year yield retreating after its wildest five-day spike in over 20 years.

The calming of the bond market is a massive deal in itself — especially for those who’ve been gearing up for a doomsday scenario when buyers strike. Look, we all know how fast sentiment can spiral in a world of basis trade blowups and 300 bps intraday swings in FX markets. But that’s exactly why central banks exist — to step in when the market starts chewing through its own plumbing.

Enter Boston Fed’s Collins on Friday with a blunt message: the Fed has the bond market’s back. Full stop. You can talk about moral hazard and market dependency all day long, but when push comes to shove, the Fed’s role as buyer of last resort isn’t up for debate.

Sure, there's always a risk. A currency shock? Absolutely on the table. An inflation pop? It wouldn’t be the first time. But a full-on bond market meltdown? Highly unlikely when the central bank still owns the keys to the liquidity vault.

In this twitchy market, the bond put narrative is re-emerging — and traders are starting to lean into it. Don’t mistake that for a rate-cut party just yet, but do recognize what’s happening: the Fed manages tail risk, not the headlines.

And then there’s Chris Waller — arguably the most intellectually honest voice on the FOMC right now — still sounding more dovish than his peers. While the rest of the Fed chorus sings the same tired tune about defending inflation expectations “at all costs,” Waller seems more willing to acknowledge the reaction function is not binary.

That nuance matters, and he just cracked the door open to rate cuts — with a trader’s wink. He says that if the inflation spike from tariffs proves transitory, the real risk is a recession, which could push the Fed to cut sooner and deeper than expected. In his words, that’s when he’d “favor cutting… to a greater extent.”

But Waller’s also keeping the other side of the book open: if tariffs are just a bluff — a short-term negotiation tool — then the Fed’s playbook might look like business as usual. In that case, any rate cuts would be “good news” easing — not to rescue a crumbling economy, but to keep the soft-landing dream alive on the back of cooler inflation.

Whether it’s recession hedging or “mission accomplished” cuts, Waller’s signalling that the Fed’s pivot isn’t just coming — it’s now a two-way optionality trade.

In this twitchy market, the bond put narrative is re-emerging — and traders are starting to lean into it. Don’t mistake that for a rate-cut party just yet, but do recognize what’s happening: the Fed is managing tail risk, not the headlines.

Call it a relief rally, call it tariff fatigue — whatever it is, the street is loving a break from the mayhem.

One of the most underappreciated stories flying under the radar — and arguably one of the most compelling byproducts of Trump’s tariff sledgehammer — is this: Nvidia’s bringing AI supercomputer production to U.S. soil.

Yep, you read that right. I’m skipping the tariff noise and zoning in on the real game-changer: a global supply chain reset that’s quietly rewriting the rules.

Nvidia confirmed Monday it will start building AI supercomputers in the U.S. for the first time ever, partnering with Foxconn and Wistron to stand up two facilities in Houston and Dallas. Mass production? Expected to kick off in 12 to 15 months.

This isn’t just a headline — it’s a direct result of policy designed to force tech titans out of China’s industrial orbit and slap a shiny “Made in America” tag on the next generation of AI infrastructure.

It’s a textbook case of tariffs-as-leverage doing what they were meant to do: rearchitect the supply chain, not just play political football. And while the market may not have fully priced this in yet, this is the kind of shift that could redefine U.S. tech sovereignty over the next cycle.

Keep your eyes peeled — this isn't just chips and optics. It’s geopolitics, economics, and industrial policy all rolled into one.

There’s no denying it anymore — we’re in the thick of a new era of carrot-and-stick diplomacy, and the market’s just beginning to digest the implications. Gone are the days of backroom handshake deals and polite multilateralism. What we’re seeing now is a strategic chess match where tariffs, exemptions, and industrial incentives are the new pawns and queens.

Take a step back and look at the big picture: every headline about tariffs slapped or paused, every hint of dollar repatriation, and every “Made in America” AI chip plant announcement — they’re all part of a carefully engineered dual-track strategy.

The stick? Tariffs. Aggressive ones. Reciprocals. 145% shockers. Designed not just to punish, but to shake boardrooms out of their decade-long China dependency stupor. When you can’t plan your Q3 CapEx because Washington might move the goalposts again — you start hedging by reshoring.

The carrot? Massive subsidies, tax incentives, exemptions for strategic goods (like tech and autos), and 90-day reprieves that serve as a soft landing for friendlier trade partners. It’s a “you play ball, we ease up” framework — equal parts negotiation and manipulation.

But here’s the part that’s making Wall Street squirm: this whole construct reeks of stealth wealth redistribution. Not in the old-school populist tax-and-spend sense, but in the quiet redirection of capital from shareholder buybacks and offshore arbitrage to domestic infrastructure, labor, and industrial revival.

Think about it — every dollar spent on American supply chains, AI fabs in Texas, or rare-earth processing in Oklahoma is a dollar not being routed through low-wage, high-margin zones abroad. And that’s got the legacy globalists shaking in their Gucci loafers.

This isn’t anti-business — it’s pro-strategic autonomy. And the shift is gaining traction. Whether it’s semis, EVs, energy security, or AI — the playbook is clear: reward allies, punish free-riders, and rebuild domestic capacity. Even if it bruises margins in the near term.

So, while the market is still trying to price this in, here’s the takeaway: the carrot-and-stick trade doctrine is here, and it’s not just trade policy — it’s a full-blown macro reset. Traders would do well to stop viewing this through the old “free trade vs. protectionism” lens. That book’s been closed. This is about controlled rebalancing of global capital flows — with tariffs as the club, and fiscal firepower as the bait.

Get used to it.

As the rest of us try to decode the policy smoke signals out of Washington, Trump’s inner circle has slipped into full-on ‘good cop, bad cop’ mode. On one side, you’ve got Howard Lutnick going scorched earth — calling out trade cheaters and promising tariffs with the kind of fire-and-brimstone tone that lights up Bloomberg terminals. On the other? Scott Bessent — the velvet-gloved negotiator who shows up with the chessboard and a pocket full of carrots, dangling deals for any country willing to align with U.S. economic and security goals.

It’s classic negotiation theatre. Lutnick sets the stage with maximum pressure, and Bessent walks in to seal the handshake. But underneath the theatrics, there’s real strategy. Remember, Bessent has said before that tariff costs would be “eaten” — partly by exporters slashing prices and partly by a stronger dollar cushioning the U.S. side. But now? The DXY has crashed below 100, and that "strong dollar" part seems to have quietly left the building.

This raises a big question: Is this by design? Because let’s be honest — overvaluation of the dollar has long been one of Trumpworld’s biggest gripes. Navarro raged about it, Bessent flagged it, and Trump himself has said it's killing American manufacturing. So what we might be watching here is a classic “have your cake and eat it too” play — weaken the dollar just enough to juice U.S. trade, but not enough to shake the dollar’s reserve status halo. After all, Bessent did tell Tucker Carlson that the administration still supports a strong dollar — “over the long term.” Translation: short-term pain, long-term prestige

The view

By launching the tariff salvo on April 2nd, Trump did what markets, CEOs, and global leaders didn’t think he’d actually pull the trigger on — and in doing so, he made sure everyone felt it. The impact wasn’t theoretical anymore — it was real, visceral, and priced into equity screens, cost structures, and political calendars across the globe. Message received.

And just as the pressure started boiling, he pulled a classic Trump move: hit hard, then offer a hand. The 90-day pause on reciprocal tariffs and the weekend carve-out for key goods wasn’t a walk-back — it was strategic flexibility. He sent a clear signal to allies and U.S. corporates: “I hear you.” Especially the ones blindsided by the overnight tariff shock.

But the 145% hammer on China? That stayed. That wasn’t a glitch — it was the point. It told Beijing that if they want to play the retaliation game, they’ll be facing real consequences. No more free rides.

Here’s the issue, though: Main Street is bleeding. America’s small and mid-sized businesses — the backbone of supply and job creation — don’t have the resources to spin up new supply chains overnight. They’re caught flat-footed.

Here’s the fix: dial back the China tariffs to 10% for 90 days, mirror the pause offered to other trade partners, and let the invisible hand do its thing. You’ll still get the supply chain reallocation without nuking the ecosystem in the short term. More importantly, it gives U.S. companies a critical window to adjust without cratering their balance sheets.

China will still feel the heat — make no mistake. Whether it’s 145% today or 145% in 90 days, the pressure to negotiate won’t go away. What the delay does is put the ball back in their court: show up and deal, or get smoked on Day 91.

Strategically, this is the smarter move. Let U.S. businesses prep, show the world you’re not trying to burn the system down, just reset it — and if China stalls, then you go full hammer. You’ll have public buy-in, corporate readiness, and maximum leverage.

Call it the “Art of the Tariff Pause.” Maximum pressure, minimum fallout — with an off-ramp built in.