President Donald Trump and his advisers said this was the plan all along: Scare the bejesus out of the world by announcing astronomically high tariffs, get countries to come to the negotiating table, and — with the exception of China — back away from the most punishing trade barriers as America works out new trade agreements around the globe.
But Trump's 90-day pause on his "reciprocal" tariffs that were never actually reciprocal gives his administration just three months to strike enormously complex trade deals with dozens of countries that it says are lining up to negotiate.
Financial markets aren't buying it. Stocks have whipsawed as volatility has spiked.
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And other markets, including oil, bonds and the dollar, are sending a clear message of deep skepticism that Trump will be able to pull this one off.
Stocks
Following another steep sell-off Thursday, stocks appeared calmer — for now — and posted strong gains Friday.
The Dow ended the day higher by 619 points, or 1.56 per cent. The S&P 500 rose 1.81 per cent and the Nasdaq was 2.06 per cent higher.
Markets were buoyed by Boston Federal Reserve President Susan Collins telling the Financial Times Friday that the central bank would step in to support financial markets if there were signs of distress.
But stock market investors have been trading on a knife's edge, and any announcement coming from the Trump administration on tariffs has the ability to send stocks surging or tumbling.
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For example, stocks plunged Thursday after the Trump administration clarified the math it had already used to set China's massive 145 per cent tariff.
The street had believed the tariff was 125 per cent. The Dow sank sharply, at one point falling more than 2000 points.
In the 129-year history of the Dow Jones Industrial Average, the index has closed higher or lower by at least 1000 points just 31 times. Four of those times happened in the past week.
The S&P 500 fell by just over 9 per cent across the first week of April, its biggest one-week drop since March 2020.
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The benchmark index gained 5.7 per cent this week, its biggest one-week gain since 2023.
Despite Wednesday's historic gain after Trump announced his detente, stocks remain well below where they were trading before the president presented his "Liberation Day" tariff plan on April 2.
Bonds
The bond market is acting weirdly.
Typically, you'd expect bond prices to rise throughout periods of turmoil. US Treasuries are historically considered to be the safest of safe assets, backed up by the full faith and credit of the US government.
But bonds aren't rising — they're falling.
That's largely because investors have lost faith in US trade policy, and they fear America could get hurt even worse than the countries Trump's tariff policy is targeting.
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As JPMorgan Chase CEO Jamie Dimon said in his annual letter to shareholders Monday, Trump's "America First" policy risks alienating its most important partners and the country's special standing in the world.
US Treasury yields, which trade in opposite direction to prices, briefly surged on Friday above 4.5 per cent. They were under 4 per cent earlier in the week.
That represents a massive move for the market. Higher yields could hurt America's economy, as a number of consumer loans are closely tied to those rates.
"The upward action in rates has been rapid in historical context and has provided no comfort to investors looking for havens in turbulent markets," analysts at Citi said in a Friday note.
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US Treasuries were on track for their worst week since 2019, according to Bloomberg's US Treasury total return index, when the New York Federal Reserve had to step in and purchase Treasuries to bring down a spike in yields caused by a liquidity crunch.
"Current market conditions don't require Fed intervention at this point, but Fed officials are likely monitoring market function closely," said Chip Hughey, managing director for fixed income at Truist Advisory Services.
Dimon said Friday on an earnings call that he expects there will be a "kerfuffle" in the Treasury markets that would lead to the Federal Reserve intervening.
"They're not going to do it now … they'll do it when they start to panic a little bit," Dimon said.
Oil
The oil market has been trading like we're going into a recession.
Prices have tumbled over the course of the past couple of weeks as investors feared Trump's trade policy could sap demand for travel, shipping and transportation — all of which require fuel.
US oil on Friday morning fell below $US60 ($96) a barrel, close to a four-year low, before recovering slightly.
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Brent, the global benchmark, was hovering around $US63 ($100) a barrel, the lowest since April 2021, before also gaining slightly.
Oil gained on Friday after US Energy Secretary Chris Wright told reporters that the US could stop Iran's oil exports as part of Trump's negotiations over the nation's nuclear program, according to Reuters.
US oil settled up 2.4 per cent at $US61.50 ($98) a barrel. Brent rose 2.26 per cent to $US64.76 ($103) a barrel.
Yet concerns remain about the impact of tariffs on economic growth and how a potential slowdown could disrupt demand for oil.
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Oil prices have served as a prime recession indicator in recent years. Prices tumbled after surging above $US100 ($160) a barrel for the first time as the Great Recession took hold in 2008.
And prices went negative for the first time during the pandemic as a glut of oil became so severe that traders were literally paying storage facilities to take the unwanted oil off their hands.
Dollar
The dollar on Friday tumbled to its lowest level in three years. That's the opposite of what you'd expect when tariffs are put in place.
Typically, tariffs raise the value of a local currency, because it encourages residents to purchase homemade goods instead of foreign options, stretching their money further in comparison to other currencies.
But currency traders have sold off the dollar, because they believe America will bear the brunt of Trump's trade war fallout and end up comparatively weaker than before tariffs were put in place.
The dollar on Friday hit its lowest level against the euro since 2022.
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The dollar index — which measures the dollar against a basket of currencies — fell 0.9 per cent Friday after tanking 2 per cent Thursday, which was its worst single-day drop since 2022.
Those are massive moves in currency trading world.
"Investors and central banks are selling Treasuries and dollars due to a loss of confidence and credibility in American assets," said Joe Brusuelas, chief economist RSM. "Financial chaos has its cost."
Meanwhile, gold prices surged above a record high $US3,200 ($5125) a troy ounce on Friday.
Gold is up more than 23 per cent this year and just posted its best quarter since 1986. The yellow metal is considered a safe haven amid economic and political uncertainty.
Trade deals
Despite financial markets casting enormous doubt that the Trump administration can salvage the opportunity it created for itself to strike bilateral trade agreements with all 150 countries around the world, the Trump administration remains optimistic.
Treasury Secretary Scott Bessent said this week that more than 70 countries have asked to meet with US representatives to strike a deal that could get them out from under the thumb of Trump's punishing tariffs.
Although the administration has provided few details of which countries it is negotiating with, it said it would favor allies like South Korea and Japan first.
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But trade deals are incredibly complex arrangements usually negotiated over the course of years, not months.
And even if Trump were to negotiate trade with all those countries over a short period — whether full deals or letters of agreement that put a framework of a deal together — China, the world's biggest exporter, remains the elephant in the room.
US tariffs on China are now at least 145 per cent and China on Friday retaliated with 125 per cent tariffs of its own.
That will do enormous damage to the world's two largest economies, and both sides have said they are not eager to back down.
China has consistently said it is open to negotiations, but wants to do it in a way in which it will be respected.
China has ignored America's warnings not to raise its tariffs, according to a source familiar with the discussions.
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In the meantime, economists have been unmoved by Trump's sudden change in tune. Although negotiated trade agreements would undoubtedly be good news for the economy, much of the damage has already been done, Wall Street economists have argued.
And punishing 10 per cent universal tariffs remain in place, as do 25 per cent tariffs on autos, 25 per cent tariffs on some goods from Mexico and Canada, and 25 per cent tariffs on steel and aluminum.
That's why JPMorgan and Goldman Sachs say the likelihood of the United States and the global economies going into a recession this year are basically a coin flip.
