US President Donald Trump sent global markets soaring on Wednesday after indicating that trade talks with China could lead to ‘substantially’ lower tariffs. The POTUS also took a u-turn of sorts to insist that he had no plans to fire Fed Chair Jerome Powell over interest rates — after weeks of criticism that had sent markets roiling.
The Dow Jones Industrial Average futures rose nearly 700 points on Wednesday morning while futures tied to the S&P 500 saw a 2% spike. The tech-heavy Nasdaq-100 futures added 2.4%. Asian and European markets also reacted positively to the potential climb-down on tariffs while the price of Bitcoin (which has been trending up in the past week despite market turmoil) continued its upward trajectory. The popular cryptocurrency rose by more than 6.5% within 24 hours to stand at $94,175.
Trump vs Powell
“I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates. This is a perfect time to lower interest rates. If he doesn’t, is it the end? No, it’s not. But it would be good timing,” Trump told reporters at the White House on Tuesday.
The Trump administration has been vocal in its criticism of Powell in recent weeks — with White House officials even looking into the possibility of firing the Fed chair. The Fed has left its benchmark policy rate on hold in the range of 4.25% to 4.50% since December following a series of rate cuts late last year. Trump however insists that the economy would slow down unless Powell (who he referred to as Mr. Too Late, a major loser in a recent post) immediately lowered the interest rates. The recent developments have spurred investor anxiety about the Fed’s independence in setting monetary policy path and about the outlook for US assets.
US-China Trade War
Investor sentiment was also aided by a potential ‘de-escalation’ of the ongoing US-China trade war — with Trump heralding a ‘substantial’ dip in tariffs on Tuesday evening. The remarks came hours after Treasury Secretary Scott Bessent admitted that the “unsustainable” tariffs had essentially created a trade embargo.
“145% is very high, and it won’t be that high. It’ll come down substantially, but it won’t be zero,” the POTUS told reporters in the Oval Office.
It remains unclear whether the two countries have already entered into negotiations over the tariffs. However the President said that the US was “going to be very good to China, have a great relationship with President Xi”.