The initial market cheer following Donald Trump’s recent tariff rollback has proven short-lived, with US stocks dipping in early morning trading. While the announcement initially boosted investor sentiment, uncertainty is now setting in as analysts and businesses weigh the broader implications of the partial tariff reversal.
On Tuesday, major US indices opened lower, erasing gains made after Trump’s surprise decision to pause certain import tariffs. The move, which many interpreted as a sign of softening trade tensions, was met with optimism. However, the euphoria faded quickly as it became clear that key tariffs remain in place—especially those targeting vehicles and Chinese imports.
Russ Mould, investment director at AJ Bell, warned that this market pullback could be the beginning of a more extended period of volatility. “Disappointment sets in gradually,” Mould commented. “While markets often react swiftly to news, the deeper analysis takes time. Investors are now starting to ask what exactly the tariff pause means for long-term business operations and profit margins.”
A Partial Rollback and Persistent Concerns
The reversal only applies to select categories of goods, with a sweeping 10% levy still affecting the majority of imports. Notably, the 125% tariff on goods from China remains untouched. These figures are significant enough to continue distorting global supply chains and inflation expectations.
For many firms, particularly in manufacturing and retail, the announcement does little to alleviate immediate cost pressures. “It’s a partial reprieve at best,” said Claire Donovan, a trade analyst at the Brookings Institution. “The reality is that companies are still navigating a complex and costly tariff environment.”
Markets are also responding to mixed signals from the White House. While Trump’s move may suggest a more moderate stance on trade, his administration has not clarified its long-term strategy. The absence of clear direction is unsettling investors who seek policy stability in an already uncertain global economic landscape.
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Inflation Data Brings No Relief
Compounding the market’s unease is the latest inflation data, which—although positive on the surface—is being treated with caution. The US Labor Department reported on Wednesday that inflation cooled in March, with prices rising by 2.4% year-on-year, down from February’s 2.8%. This marks the slowest rate of increase since September 2024 and should, in theory, bring some relief to consumers and the Federal Reserve.
However, economists are warning that the data may not reflect the full picture.
“This inflation report is essentially looking in the rearview mirror,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “It doesn’t capture the expected price surges that will likely follow from tariffs still in effect.”
Zentner pointed out that consumer goods categories vulnerable to import costs—such as electronics, vehicles, and household essentials—are likely to see fresh price increases in the coming months. The current inflation cool-off may be a short-lived anomaly before a new upward trend kicks in.
What It Means for the Federal Reserve
The Federal Reserve, which has been carefully watching inflation as it navigates interest rate decisions, finds itself in a complex position. A weaker inflation reading would typically support the case for maintaining or even lowering interest rates. However, with the looming impact of tariffs, policymakers are hesitant to make premature moves.
“Inflation is being held back temporarily, but the underlying pressures remain,” said Teresa Hayes, senior economist at JPMorgan Chase. “The Fed has to consider not just what’s happening now, but what’s around the corner—and right now, that looks like more inflation risk, not less.”
Fed Chair Jerome Powell has maintained a cautious tone, emphasizing the importance of sustained data over headline figures. With markets swinging between hopes for rate cuts and fears of persistent inflation, the central bank’s next move is far from predictable.
Global Impact and Investor Sentiment
International markets have also responded to the shifting narrative. Asian markets closed mixed, while European indices wavered in early trading. Global investors remain wary of the US economic outlook, particularly given the strong influence American inflation and interest rate decisions have on worldwide financial conditions.
Meanwhile, US-based multinationals continue to assess how the tariff landscape will impact supply chains, pricing strategies, and consumer demand. Some firms may choose to absorb the added costs, while others could pass them on to consumers—potentially reigniting inflationary pressure.
Conclusion: A Moment of Pause
The initial excitement over Trump’s tariff rollback has given way to a more sober reassessment. Markets, while still hopeful for a more stable trade environment, are grappling with persistent uncertainties around policy, inflation, and global growth.
As Russ Mould aptly put it, “Markets may jump on headlines, but the hangover can be slow and painful when the underlying issues remain unresolved.”
With inflationary threats still looming and clarity on trade policy lacking, the road ahead for the US economy—and its markets—looks far from smooth.
