Tariff Timeout Sends Stocks Roaring BackTariffTimeoutSendsStocksRoaringBack

President Donald Trump’s decision to suspend most of his reciprocal tariffs allayed market fears of looming economic turbulence, triggering one of the largest US stock-market rallies on record Wednesday. Hours after reciprocal tariffs officially kicked in, Trump announced that he would put those import duties on hold for 90 days and leave tariffs at a flat 10% for most countries, excluding China, amid ongoing talks with trade partners. “You have to be able to show a little flexibility,” Trump told reporters outside the White House. The S&P 500 surged 9.52% in its third-largest daily gain since World War II, according to FactSet. Stocks rallied overseas on Thursday with major indexes in Europe and Asia also rising. While the tariff pause gave markets relief, uncertainty remains over how the ensuing negotiations will play out, and Wall Street gave back some of its gains in Thursday trading. The European Union, which suspended retaliatory tariffs it planned to impose on the US, had expressed interest in making a “zero-for-zero” tariff deal to resolve the dispute.

Investors and economists were just beginning to reassess the impact of tariffs when the Commerce Department delivered an encouraging report on inflation, which cooled more than expected in March. The consumer price index was up 2.4% year-over-year, below a 2.8% rise in February. Excluding food and energy prices, core inflation slipped to a four-year low of 2.8%. PGIM Fixed Income’s Weekly View from the Desk explores the various economic scenarios that could develop from an evolving trade landscape.