Stock markets skyrocket after Trump announces 90-day pause on some tariffs, 125% rate for China

U.S. stocks soared to one of their best days in history on a euphoric Wall Street Wednesday after President Donald Trump said he would back off on most of his tariffs temporarily, as investors had so desperately hoped he would.

The S&P 500 surged 9.5 per cent — an amount that would count as a good year for the market, and the index's third-best day since World War II. The Dow Jones Industrial Average shot up 7.9 per cent. The Nasdaq Composite leaped 12.2 per cent. 

The S&P/TSX Composite Index closed up 1,220.13 points at 23,727.03.

Markets had been sinking earlier in the day on worries that Trump's trade war could drag the global economy into a recession. But then came the posting on social media for which investors worldwide had been waiting and wishing.

"I have authorized a 90-day PAUSE," Trump said, after recognizing the more than 75 countries that he said have been negotiating on trade and had not retaliated against his latest increases in tariffs.

Trump said that because so many countries had "not retaliated" against his latest tariffs, "I have authorized a 90-day pause, and a substantially lowered reciprocal tariff during this period, of 10 per cent, also effective immediately."

WATCH | Stocks rally as U.S. pauses some tariffs, raises those on China: 

Stocks rally as U.S. pauses some tariffs, raises those on China

4 days ago

Duration 11:47

U.S. President Donald Trump said in a TruthSocial post that he’s pausing so-called ‘reciprocal’ tariffs on many countries for 90 days. He also wrote that he’s increasing tariffs on China. Global stock markets soared in response, though experts warn the U.S. bond market is still troubling.

U.S. Treasury Secretary Scott Bessent later told reporters that Trump was pausing his so-called "reciprocal" tariffs on most of the country's biggest trading partners, but maintaining his 10 per cent tariff on nearly all global imports.

China was a huge exception, though, with Trump saying tariffs are going up to 125 per cent against its products. 

Before the announcement, markets were swinging and U.S. government bond yields were up earlier in the day on news that China would impose an 84 per cent tariff on all U.S. goods.

Wednesday's rally pulled the S&P 500 away from the edge of a so-called bear market, when a run-of-the-mill drop of 10 per cent for U.S. stocks, which happens every year or so, graduates into a more vicious fall of 20 per cent. The index is now down 11.2 per cent from its record.

Wall Street also got a boost Wednesday from a relatively smooth auction of U.S. Treasuries. Earlier jumps in Treasury yields had rattled the market, indicating increasing levels of stress.

The moves are particularly notable because U.S. Treasury yields have historically dropped -- not risen -- during scary times for the market because the bonds are usually seen as some of the safest possible investments. This week's sharp rise had brought the yield on the 10-year Treasury back to where it was in late February.

The higher yields on Treasury bonds add pressure on the stock market and will likely push up rates for mortgages and other loans for U.S. households. 

The yield on the 10-year Treasury pulled back to 4.34 per cent after 4.50 per cent earlier in the morning. That's still up from 4.26 per cent late Tuesday and from just 4.01 per cent at the end of last week.

LISTEN | What does the stock market chaos mean for your money? 

The Current18:49What does stock market chaos mean for your money?

Trump’s global tariffs have sparked a stock market meltdown, leaving many Canadians worried about their investments, their pensions — and what it all means for day-to-day cost of living. Guest host Mark Kelley breaks down how this will affect ordinary Canadians with the CBC’s senior business reporter Peter Armstrong and economist Armine Yalnizyan.

This doesn't mean the trade war is over, however. The U.S. treasury secretary said in a message to countries worldwide — but perhaps most directly aimed at China: "Do not retaliate, and you will be rewarded."

"I do think that this is a game of 'chicken' in the sense that both sides [China and the U.S.] are upping the barriers," said Peter Andersen, founder of Andersen Capital Management.

"What we're seeing now is a complete correlation between any news related to tariffs and the stock market reactions."

The European Union on Wednesday also approved tariffs affecting $23 billion in U.S. goods in its own retaliatory move.

In stock markets abroad, indexes tumbled across most of Europe and much of Asia after they closed before Trump's
announcement. London's FTSE 100 dropped 2.9 per cent, Tokyo's Nikkei 225 sank 3.9 per cent and the CAC 40 fell 3.3 per cent in Paris. Chinese stocks were an outlier, and indexes rose 0.7 per cent in Hong Kong and 1.3 per cent in Shanghai.