The S&P 500 is gyrating wildly amid on a rumor that President Donald Trump might hit the pause button before the escalation of reciprocal tariffs takes effect at 12:01 a.m. ET on Wednesday. The White House shot down its accuracy, but pressure has mounted on Trump as the S&P 500 verged on a bear market and high-profile supporters warned of financial disaster. Yet Trump hasn't given any sign of wavering on tariffs, posting early Monday, "The United States has a chance to be do something that should have been done DECADES AGO. Don't be Weak!"
Still, a pause seems possible, if not likely, based both on Trump's prior behavior and because it would be easy to spin as a win. A pause would allow time for negotiations, after top White House economic adviser Kevin Hassett said Sunday that more than 50 countries have offered to bring down their trade barriers.
Trump Tariffs Jump On Wednesday
Trump's reciprocal tariffs announced on Wednesday were scheduled to take effect in two steps. The first step, on April 4, was a 10% tariff on almost all trading partners. The next step will ratchet up Trump tariffs on trading partners alleged to be abusive. With that next step, the across-the-board tariff imposed on China this year would jump from 30% to 54%. The tariff rate would jump from 10% to 20% for the European Union, 24% for Japan, 46% for Vietnam, 26% for South Korea, 32% for Taiwan and 27% for India.
'Trump Will Need To Back Down'
"My base case is that Trump will need to back down over the coming days, but in way that he can claim victory," Jefferies chief economist and strategist for Europe Mohit Kumar wrote in a Monday note.
That wouldn't be the first time this year. Trump previously took a step back on Feb. 3, announcing a 30-day pause just a day after imposing blanket 25% tariffs on imports from Mexico and Canada. On March 6, two days after his reprieve had expired, Trump narrowed 25% tariffs to imports that didn't comply with the U.S.-Mexico-Canada Agreement negotiated in his first term, largely exempting autos.
Back in August 2019, Trump postponed a plan to impose 10% tariffs on $160 billion in Chinese imports on consumer goods, including Apple iPhones, to avoid raising costs during the Christmas shopping season.
Ackman, Musk Disapprove
Over the weekend, billionaire investors Bill Ackman and Elon Musk both were openly critical of the reciprocal Trump tariffs. Ackman asked Trump to call "a 90-day time out" to negotiate deals, warning of an "economic nuclear winter" if he doesn't. In one post, Ackman said that the plunging S&P 500 has made Trump's negotiating position untenable. The implication is that a pause would stabilize markets and strengthen Trump's hand.
Telsa is among the biggest losers in the S&P 500 early Monday, diving about 5% after Wedbush analyst Dan Ives, among the biggest Tesla bulls, cut his price target for the stock to 315 from 550, but kept a buy rating. Ives said that tariffs are turning Tesla's brand crisis into a "perfect storm."
S&P 500
The S&P 500 opened down close to 4% on Monday, before shooting into positive territory on the rumored pause. Just after 11 a.m. ET, the S&P 500 is off 0.55%. The S&P 500 crashed 10.5% over the prior two sessions, finishing the week 17.4% below its all-time closing high on Feb. 19.
Among the troubling financial market signs on Monday was that the 10-year Treasury yield turned higher, even as equities sold off hard. In other words, long-term Treasuries aren't looking like a safe haven at the moment. That has negative implications for funding federal deficits and may add to pressure on Trump to hit the pause button.
