Trump Softens Tone on Tariffs, Says He Won’t Fire Powell
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Wall Street traders are going all-in on risky bets that President Donald Trump is dialing down his combative agenda after the White House struck a softer tone on trade and Federal Reserve independence, sending stocks and bonds rallying.
U.S. equities are poised to build on the biggest gains in two weeks, with S&P 500 futures climbing 2.6% after Trump allayed fears that he plans to fire Fed Chair Jerome Powell. Global stock markets from Asia to Europe marched higher and the U.S. dollar stabilized, after Trump and Treasury Secretary Scott Bessent sought to defuse U.S.-China tensions with a series of mollifying comments toward the world’s second-largest economy.
All told, money managers are wagering that Trump is blinking, after his saber-rattling sparked a more than $10 trillion equity rout and warnings of a tariff-spurred recession this year.
Shares of Tesla Inc. rose premarket after CEO Elon Musk said he will pull back from his work with the U.S. government to focus on the electric vehicle maker. Europe’s Stoxx 600 index marched 1.4% higher.
Powell turns to Trump during his announcement as Fed chair in November 2017. (Pablo Martinez Monsivais/Associated Press)
Treasuries mostly rallied as worries about threats to Powell’s position faded. Benchmark 10-year yields dropped 11 basis points to 4.29%. A gauge of dollar strength steadied after rallying from a 16-month low. Bitcoin stormed above $90,000 for the first time since early March. Gold fell as demand for havens cooled.
Trump’s comments on the Fed chief late April 22 are a walk-back from opinions expressed in the past week that sparked concerns about the U.S. central bank’s independence. On the trade front, Trump and Bessent said that a standoff with China can be de-escalated.
“I took the view that the actual probability of Powell getting sacked was close to zero, but the tuning down of the rhetoric on China is clearly a relief,” said Francois Rimeu, a strategist at La Francaise AM in Paris.
Trump said late Tuesday he had no intention of firing Powell, despite his frustration with the Fed not moving more quickly to lower borrowing costs. The president posted on social media last week that the Fed chair’s “termination cannot come fast enough!” His rebuke of the Fed and comments from officials that Trump was studying whether he could replace its chief had sent the dollar to the lowest level since December 2023.
“If one is optimistic, one can take the view that Trump is slowly backing down on trade and on firing Powell,” said Gillles Guibout, head of European equities at AXA IM. “But he has a structural tendency to create uncertainty and now there’s a real defiance among international investors, and that’s palpable in the dollar.”
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On trade, Trump said he plans to be “very nice” to China in any talks and that tariffs will drop if the two countries can reach a deal, a sign he may be backing down from his tough stance on Beijing amid market volatility. Trump also said that final tariffs on China wouldn’t be “anywhere near” the 145% level set.
“It’s really hard to see the endgame on trade,” said Rimeu at La Francaise AM. “Investors need to prepare in the event that say, in three months, we land with U.S. tariffs that are manageable for the global economy.”
