Stock markets around the world are marching higher on news that U.S. President Donald Trump is holding off on imposing new tariffs on America’s trade partners.
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Trump issued a broad trade memo on January 20, the day of his inauguration, but stopped short of immediately imposing new tariffs on key U.S. trading partners such as China, Canada, and Mexico. Instead, Trump said America’s trade relationships will be reviewed on a case-by-case basis before any actions are taken.
Markets appear to staging a relief rally on news of no new trade tariffs. All three major U.S. stock indices, including the benchmark S&P 500 (SPX), are gaining in pre-market trading (American markets were closed January 20 for Martin Luther King Jr. Day). Markets are also trading higher in Europe and Asia.
Trade Wars Averted?
In the lead-up to his second term as president, Trump had threatened to impose trade tariffs as high as 25% on many of America’s closest trade partners, such as China and Canada. Those threats raised concerns about trade wars and renewed inflation, something analysts had warned would be a disaster for the U.S. economy and financial markets.
Trump’s more measured approach to tariffs is being applauded by financial markets. However, it has led to a sharp downturn in the U.S. dollar. The greenback fell 1%, its biggest decline since August of last year, on news of a softer trade approach. Previously, the U.S. dollar had appreciated about 10% since last fall.
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