Stock Market Reaches New Heights Amid Tariff Changes
On Friday, major stock market indexes hit record highs, bouncing back from a downturn triggered by President Trump’s tariffs earlier in the spring.
The S&P 500 index climbed by 0.5%, adding about 32.6 points and surpassing the prior record of 6,147 points set back in February. Meanwhile, NASDAQ composites rose by 0.3%, and the Dow Jones industrial average increased by 0.4%.
Stocks have regained their former peaks after the president significantly trimmed the extent of his import taxes following the announcement of his trade agenda in March and April.
In April, Trump indicated he would shake up the market with around $600 billion in tariffs impacting nearly all U.S. trading partners. This announcement followed earlier import taxes on Canada, Mexico, and China, along with additional tariffs on foreign metals and auto parts.
Initially disregarding how the market might react, Trump altered his trade plans two weeks later. He postponed tariffs on most countries, while the tax on China was increased to an astonishing 145%.
Since then, the U.S. and China have engaged in discussions to lower tariffs on various goods and to facilitate China’s exports of rare metals to the U.S.
China’s Ministry of Commerce confirmed additional aspects of this agreement on Friday.
“China will review and approve eligible export applications for controlled items as per the law. Subsequently, the U.S. will be lifting numerous restrictions imposed on China,” a provincial spokesperson stated.
Current estimates of U.S. tariff rates range between 25% and 10-15% as both countries imposed significant tariffs on each other. According to Yale Budget Lab, the average stands at about 15.8% overall.
New tariffs include general duties of 10%, 30% on goods from China, 25% on automobiles, and similar duties on steel and aluminum, in addition to 25% on several products from Canada and Mexico.
The Congressional Budget Office projected at the start of June that these new tariffs could reduce the primary deficit by $2.5 trillion, bringing the total expected deficit down to around $2.8 trillion.
A recent downward revision of GDP for the first quarter might also spark some optimism on Wall Street, potentially paving the way for interest rate cuts from the Federal Reserve.
However, an unexpectedly high inflation rate reported on Friday might complicate this scenario. Inflation rose to 2.3% in May, up from 2.1% the previous month.
If we exclude food and energy, core prices still climbed 2.7% year-over-year, rising from 2.6% in April.
“Today’s report suggests concerning trends in economic activity and inflation, likely keeping the Federal Reserve on the sidelines for the time being,” noted Eugenio Aleman, an economist at Raymond James.
