Global stock markets and the dollar have rallied on hopes of two significant climbdowns by the Trump administration on issues blamed for a slump in values.
Remarks by the US Treasury secretary on punitive tariffs against China lifted the mood on Wall Street initially before the president himself moved to calm market trade war worries and also end speculation he could fire the head of the country’s central bank.
The Dow Jones Industrial Average and tech-focused Nasdaq Composite both ended Tuesday trading 2.7% up, erasing losses of the previous day.
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Asian markets later followed that lead, with the Hang Seng in Hong Kong gaining 2.2%.
European indices also saw a strong opening, with the FTSE 100 up by more than 1%. It was led higher by Asia-focused banks HSBC and Standard Chartered.
The US dollar – badly hit by trade war implications in recent weeks – was at least a cent higher than a day earlier against many rival currencies including the pound.
The rally gathered steam when US Treasury secretary Scott Bessent told a private JPMorgan event that he expected a “de-escalation” in the spiralling spat with China.
It’s a fight that has seen US tariffs hit 145% and China responding with duties of 125%.
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Trump: Tariffs are making US ‘rich’
According to a transcript obtained by the Associated Press news agency, he told the audience: “Neither side thinks the status quo is sustainable”, but he added that peace talks were yet to start in earnest and could take time to bear fruit.
His boss later struck a similar tone in remarks to reporters when he said the final tariff rate with China would come down “substantially” from the current 145%.
“It won’t be that high, not going to be that high,” Mr Trump said, adding: “We’re doing fine with China… we’re going to live together very happily and ideally work together.”
He gave no hint that he plans to ease wider tariffs on trading partners, including the UK which is currently subject to 25% tariffs on car, steel and aluminium imports and a wider 10% “baseline” tariff.
But the president did row back on an apparent threat, made last week, to sack the chair of the Federal Reserve Jerome Powell in revenge for the US central bank holding off on interest rate cuts that could provide some stimulus to the tariff-hit economy.
Mr Powell has said the Trump administration’s protectionist policies have created uncertainty over growth and the threat of higher inflation.
The president has dismissed those arguments but told reporters: “I have no intention of firing him”.
Federal Reserve chair Jerome Powell was nominated for the role by Donald Trump in 2017. File pic: AP
His comments were widely seen as an attempt to calm financial market concerns that the independence of the country’s central bank was under threat.
Analysts cautioned there was a long way to go to recover values seen before the start of the trade war, with the Nasdaq remaining almost 16% down in the year to date alone.
US government borrowing costs also remain elevated.
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Not helping sentiment were big downgrades to global growth forecasts by the International Monetary Fund on Tuesday.
Michael Brown, senior research strategist at Pepperstone, said of the investor mood: “Participants understandably remain jittery, not only as the haven value of both Treasuries and the USD (US dollar) continue to be called into question, but also as a huge degree of trade uncertainty continues to linger.
“As a reminder, the whole concept of ’90 deals in 90 days’ is currently running at ‘0 deals in 14 days’ which, to be frank, doesn’t quite have the same ring to it.”
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