Trade Tariff Pause and Market Reaction
Last week’s announcement of a temporary halt in tariff increases and the promise to negotiate with all parties, including China, led to a significant surge in the stock market. This upswing suggests that some of the worst fears sparked by the “reciprocal tariffs” announcement have temporarily subsided. President Donald Trump acknowledged that the decision to pause was prompted by observing the bond market, where investors appeared to be “a bit queasy.”
Market as a Check on Economic Policy
These recent events may imply that markets serve as a crucial check on economic policy, especially when the international function of the U.S. economy—as a reliable provider of assets and a trusted reserve currency—is at stake. It remains to be seen whether the upcoming 90 days of tariff truce will pave the way for mutual benefits through negotiations.
Trump’s Comments on Central Bank Independence Raise Concerns
Just as the positive news was being processed, President Trump’s statement about central bank independence sparked fresh anxiety. Trump has previously expressed his preference for lower interest rates. A day before the “Liberation Day” announcement of reciprocal tariffs, Federal Reserve Chair Jerome Powell warned that the projected tariffs could lead to “higher inflation and slower growth.” In response, Trump stated on Thursday, “The termination of Powell could not be more urgent.” Later that day, he told reporters in the Oval Office, “If I want to fire him, he’ll be gone very quickly, believe me.”
Potential Financial Panic from Curtailed Central Bank Independence
Some observers concluded that restricting the central bank’s independence could trigger a more significant financial panic than the one already caused by tariffs.
About the Author
The author is an international analyst and consultant, former director of the Economic Commission for Latin America (ECLAC) office in Washington. He is an economy and finance commentator for CNN en Español TV and radio, UNIVISION, TELEMUNDO, and other media outlets.
Key Questions and Answers
- What was the recent announcement regarding tariffs? President Trump announced a temporary halt in increasing tariffs and pledged to negotiate with all parties, including China.
- How did the stock market react to this announcement? The stock market experienced a significant surge, indicating that some fears about “reciprocal tariffs” had temporarily subsided.
- What role do markets play in economic policy? Markets can act as a crucial check on economic policy, particularly when the international function of the U.S. economy is at stake.
- What concerns arose from President Trump’s comments on central bank independence? Trump’s preference for lower interest rates and his statement about potentially firing the Federal Reserve Chair, Jerome Powell, raised concerns about a more significant financial panic.
