President Donald Trump blinked. So stock prices rose. Late Tuesday, he said that he has "no intention" of firing Jerome Powell, whose term as Fed chair will end in May 2026. That's after berating Powell for the past few days and threatening to fire him.
Furthermore, Trump appeared to soften his stance on the US-China trade war on Tuesday, telling an Oval Office press conference that tariffs on Chinese goods "will not be as high as 145 per cent" and that "it’ll come down substantially, but won’t be zero."
At a private investor summit in Washington, D.C., hosted by JPMorgan Chase on Tuesday, Treasury Secretary Scott Bessent said he expects "there will be a de-escalation" in Trump's trade war with China in the "very near future." He added, "No one thinks the current status quo is sustainable" with tariff rates at their current levels. Anonymous sources told the WSJ today that the administration might take down tariffs on China to about 60% from 145% currently.
In other words, Trump and Bessent discarded some of their best cards while preparing to play tariff poker with China. The administration seems to be conceding that Americans are not ready, willing, or able to fight a trade war with China. That is weakening Trump's hand. However, financial markets are happy that Team Trump is blinking. The DXY dollar index is up 2% over the past two days. Stock prices are up sharply too.
One might expect oil to join the party if recession risks are waning. But West Texas and Brent crude fell around 2% today to near $62 and $66 per barrel, respectively. They're both trading around four-year lows (chart). Oil prices fell after Reuters reported that several OPEC+ members will suggest accelerating oil output increases for a second consecutive month in June.
