President Donald Trump’s decision to delay imposing tariffs on Mexico and Canada until February 1 has boosted US stock markets. The Dow Jones Industrial Average rose 1.2%, the S&P 500 gained 0.8%, and the Nasdaq climbed 0.6% on Tuesday. Trump stopped short of announcing widespread tariffs on his first day in office but ordered a review of US trade deals.
He threatened Canada and Mexico with 25% tariffs from February 1 and hinted at potential tariffs on China if a deal concerning TikTok is blocked. In a presidential memo, Trump directed federal agencies to investigate America’s trade deficits and potential unfair practices. He indicated that the US is not yet ready to impose tariffs on all imports, despite campaign promises of a universal 10% tariff and a 60% import tax on China.
Analysts warned that Trump’s presidency will reintroduce market unpredictability. Charu Chanana, chief investment strategist at Saxo, stated, “The first few hours of the Trump administration have underscored that the policy environment will be dynamic, and markets should brace for volatility.”
Trump adviser Judy Shelton emphasized that the primary goal is to rejuvenate the private sector by promoting economic liberty, reducing taxes, and lowering regulations.
Trump’s tariff delay boosts markets
She described tariffs as “a very effective negotiating tool” in dealings with Mexico and Canada regarding immigration. The dollar edged lower following the tariff announcement, while WTI crude oil fell 1.7% after Trump’s declaration of executive orders aimed at boosting domestic energy production. The yield on the 10-year Treasury note also dropped, boding well for stocks.
Investor optimism further spiked with news that OpenAI CEO Sam Altman is set to meet with President Trump and other tech CEOs to announce a significant private sector investment in artificial intelligence infrastructure in the US. Oracle surged about 7% on the news of its partnership with OpenAI and Softbank for this investment. Economic indicators show a strong stock market performance leading up to Trump’s inauguration.
The S&P 500 gained almost 4% from Trump’s election in November until his inauguration, marking the 11th best performance since 1944 during the “post-election honeymoon period,” according to Sam Stovall, chief investment strategist at CFRA Research. Clark Geranen, chief market strategist at CalBay Investments, noted that the markets have already factored in expectations of a business-friendly Trump administration. He expects market volatility as investors react to Trump’s policy decisions, emphasizing the importance of market performance in January as a predictor for the full year.
