Trump tariff rumors spark brief $2.5T market surge, then slump
According to a rumor that lasted just seven minutes, Donald Trump is considering a 90-day suspension of tariffs for all countries except China. During this brief period, the American stock market turned green, with stock values increasing by $2.5 trillion. However, declines soon followed.
On Monday afternoon Eastern Time, the American stock market suddenly turned green again, after being dominated by red for most of the day. The scale of declines in financial markets is also significant across the ocean. The American S&P 500 index lost 2.8 percent, while the Nasdaq fell by 3.7 percent. An equally substantial decline, reaching 3.7 percent, affected the Russell 2000 index, which tracks smaller companies' stock prices.
Then the situation changed, and instead of "bloody red," green appeared. On the social media platform X, a rumor about the alleged suspension of Donald Trump's tariffs for another 90 days spread rapidly. This information was published by Reuters, followed by Yahoo Finance and the Economic Times. CNBC also reported these rumors. Suddenly, "major indices on Wall Street changed course and surged upward," reported Reuters.
This was enough for the stock value to increase by $2.5 trillion for a few minutes compared to earlier declines.
Investors don't want tariffs
According to Bloomberg, the market responded positively to speculation about a possible suspension of tariffs. The outlet points out that if Trump follows through with maintaining the tariffs, it could trigger a swift economic downturn and push the S&P 500 into bear market territory. On the other hand, removing the tariffs could stimulate economic growth and allow stock indexes to return to record levels.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, expressed to Bloomberg that if Trump were to suddenly change his mind and abandon his plans, the markets would likely rebound and reach new highs without hesitation.
The market rally, however, quickly lost momentum. The White House dismissed the reports from Reuters and CNBC, labeling them as false. According to Bloomberg, the Trump administration contributes to the confusion with conflicting statements. While certain cabinet officials suggest that talks on reducing tariffs are underway with as many as 50 to 70 countries, White House trade adviser Peter Navarro maintains that there is no room for negotiation.
Donald Trump himself admitted on Monday that there may be permanent tariffs, but there may also be negotiations because there are things we need beyond tariffs. Investors are uncertain about how to interpret these messages.
Alec Young, who serves as the chief investment strategist at Mapsignals, believes that the implementation and long-term continuation of such a policy would lead to fundamental changes in the structure of the American stock market. He also pointed out that the market is anticipating these changes, largely because of the political outlook for the Republicans. According to Young, if voters become concerned about the possibility of a recession and feel frustrated over losing around 20 percent of their investments within just a few days, it could jeopardize Republican control in the 2026 elections. He suggested that ongoing turmoil in the stock market has the potential to drive the current ruling party out of power.
