US markets soared on Wednesday after President Donald Trump announced a 90-day pause on most tariffs, bringing relief to investors worried about the spillover effects of a global trade war.
"I have authorized a 90-day pause, and a substantially lowered reciprocal tariff during this period, of 10 per cent, also effective immediately," Mr Trump wrote on the Truth Social media platform. But Mr Trump said he was raising US tariffs on China to 125 per cent, effective immediately.
Treasury Secretary Scott Bessent clarified after the announcement that countries other than China would return to a 10 per cent tariff while negotiations take place.
The Dow Jones Industrial average surged 2,962 points, or 7.87 per cent, on the closing bell. The S&P rose 9.52 per cent, its largest one-day gain since 2008. The Nasdaq Composite rallied 12.16 per cent while the small-cap Russell 2000 rose 8.48 per cent after Mr Trump's announcement.
"It shows you that most optimists are correct in that any positive news about the trade puzzle that comes out will be responded to by a strong rally. It is indeed like a puzzle because no one really knows how the pieces come together," said Peter Andersen, founder of Andersen Capital Management in Boston.
Every member of the Dow 30 finished in the green, with Nvidia (18.72 per cent), Boeing (15.37 per cent) and Apple (15.33 per cent) leading the gains.
China announced earlier on Wednesday that it would raise tariffs on US imports to 84 per cent on Thursday in retaliation to the US's then-104 per cent levy on Chinese goods. Mr Trump said he had based the new 125 per cent tariff rate on China's "lack of respect" to global markets.
"At some point, hopefully in the near future, China will realise that the days of ripping off the USA, and other countries, is no longer sustainable or acceptable," he wrote.
Meanwhile, Mr Trump also said more than 75 countries have sought negotiations with the US.
"There will be some serious digesting of what happened today. Does that really mean that all these countries have contacted the White House? We don't know any more details of that," Mr Andersen said.
Meanwhile, the 10-year Treasury yields retreated from their overnight high of 4.51 per cent to 4.39 per cent. The yield on the 10-year Treasury was below 3.9 per cent this time last week.
The Treasury Department's $39 billion of the benchmark 10-year notes on Wednesday showed strong demand despite the sell-off.
The price of gold shot up 3.96 per cent to $3,108.6 an ounce. The price of Brent crude rose 4.33 per cent to $65.54 per barrel, while West Texas Intermediate crude rose 4.77 per cent to $62.42 per barrel.
Despite the late-afternoon rally, the uncertainty surrounding Mr Trump's tariffs are weighing on companies. Delta Air Lines withdrew its full-year financial guidance, while retail corporation Walmart is preparing for a worsening economy by keeping prices low and hunting for ways to take market share.
JPMorgan Chase chief executive Jamie Dimon also warned of a possible US recession before the 90-day pause was announced. JPMorgan and other big banks, including BNY and Wells Fargo, were due to report earnings on Friday.
Losses in European shares deepened before Mr Trump's announcement, with the pan-European Stoxx 600 slumping 3.5 per cent as the previous session's rally fizzled out.
