NEW YORK (AP) — After the crisis generated by the tariffs announced by Donald Trump against most countries in the world, investors showed their desperation on Monday by falling for a false rumor that the President of the United States was considering a 90-day pause on his tariffs.
The fake news spread through social media and also seemed to feed off an interview on Fox News, a Trump-aligned channel, where the director of the National Economic Council of the United States, Kevin Hassett, was asked about a possible pause in tariffs and said, “I think the president is going to decide what the president is going to decide.”
The markets experienced a frenetic day
The S&P 500 index dropped 11.83 points, or 0.2%, to close at 5,062.25 at the end of a day full of fluctuations as financial markets try to decipher Trump’s ultimate goal with his trade war against the rest of the world: whether it is to get other countries to accept trade agreements and possibly reduce tariffs, or if it is to reshape the economy and maintain tariffs in the long term.
The Dow Jones industrial average fell 349.26 points, or 0.9%, and closed at 37,965.60, while the Nasdaq composite rose 15.48 points, or 0.1%, to stand at 15,603.26.
The three indices started the day with sharp declines, and the Dow even dropped up to 1,700 points after even worse losses in other parts of the world. But suddenly it surged to nearly 900 points by midday. The S&P 500, meanwhile, went from a 4.7% loss to a 3.4% gain, which would have been its biggest jump in years.
All because of the false rumor of a tariff pause that was quickly debunked by the White House as “fake news”.
There, the stocks quickly went back down, and shortly after, Trump said he could increase tariffs against China even more after the world’s second-largest economy retaliated last week with its own set of tariffs on American products.
What was Trump’s threat against China?
“If China does not withdraw its 34% increase on its already prolonged trade abuses by tomorrow, April 8, 2025, the United States will impose additional tariffs on China of 50%, effective from April 9,” wrote Trump on Truth Social. “Furthermore, all discussions with China regarding their requested meetings with us will be terminated.”
When asked on Monday if he would consider a pause in his widespread tariffs, Trump responded that "we are not considering that." The US president said he was open to negotiations “if we can make a really fair and good deal for the United States” and added that it is possible to have negotiated agreements with other countries and permanent tariffs at the same time.
Trump’s statements were a slap in the face to Wall Street, not only because of the significant losses it is suffering, but also because it indicates that the president of the United States may not be swayed by their pain.
Many professional investors had long thought that a president who used to boast about the records achieved under his leadership would backtrack on his policies if they were to shake the Dow.
On Sunday, Trump told journalists aboard Air Force One that he was not worried about the drop in the markets, and stated that “sometimes you have to take medicine to fix something”.
Trump has given several reasons for his tariffs, such as bringing back manufacturing jobs to the United States, a process that could take years. On Sunday, he said he wanted to reduce the figures of how much the United States imports from other countries compared to what it exports to them.
The indexes continued to fluctuate between losses and gains on Monday after Trump’s latest tariff threat, partly because there is still hope in the markets that negotiations will take place.
Could the Fed intervene?
Trump’s tariffs also add pressure on the Federal Reserve. Investors have almost gotten used to the U.S. central bank stepping in as a hero by cutting interest rates to protect the economy during each recession.
But the Fed may have less freedom to act this time because inflation remains higher than it would like. And while lower interest rates can stimulate the economy, they can also exert upward pressure on inflation.
“The recent tariffs are likely to increase inflation, and are making many consider a higher likelihood of a recession,” wrote JPMorgan CEO Jamie Dimon in his annual letter to shareholders on Monday. “Whether the tariff menu will cause a recession or not remains unclear, but it will slow down growth.”