NEW YORK (AP) — U.S. stocks are rallying Wednesday after President Donald Trump showed again that his latest word on tariffs won’t always be his last. After pulling back on some of the tariffs he announced earlier this week, Trump revived hope on Wall Street that he may ultimately avoid a trade war that grinds down economies and sends inflation even higher.
The S&P 500 was 1.1% higher in afternoon trading, bouncing back from its sell-off that had erased all of its “Trump bump ” since the president’s election in November. The Dow Jones Industrial Average was up 493 points, or 1.2%, as of 2:45 p.m. Eastern time, and the Nasdaq composite was 1.3% higher.
The market turned higher after Trump said he’s granting a one-month exemption for U.S. automakers on his stiff new tariffs for Mexican and Canadian imports. Trump made the move after talking with Ford, General Motors and Stellantis, which owns Chrysler. All of the Big Three automakers could have been hurt sharply by such tariffs because of how much of their production happens across North America.
Trump’s announcement sent relief through Wall Street, and Ford’s and General Motors’ stock both jumped more than 5% to help lead the market. The worry has been that such tariffs would not only hurt profits for companies but also jack up prices for cars and other bills for U.S. households, which are already struggling with still-high inflation. Trump’s pullback could indicate that he’s still using the threat of tariffs as a tool for negotiation, and he may ultimately back off them if he can win what he wants.
Of course, Trump did not roll back all of the tariffs he announced on the United States’ largest trading partners, including on China. His mini-reversal may also simply add more uncertainty to a growing pile that’s sent Wall Street on its roller coaster. Just on Monday, Trump had said there was “no room” left for negotiations that could lower the tariffs on Mexico and Canada, which took effect Tuesday and caused the U.S. stock market to tumble.
“The economic impact and consumer impact is still ahead of us,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. “It comes back to what no one really knows, and that is how long these tariffs stay in place.”
The AP’s Seth Sutel reports stocks rebound after big losses.
And even if the tariffs ultimately end up being less harsh than feared, just the threat of them has already had a negative effect on U.S. households and businesses.
U.S. consumers are bracing for higher inflation because of the possibility of tariffs, and their confidence has soured sharply as a result. Businesses, meanwhile, are struggling to keep up with all the changes coming from Washington, and U.S. manufacturers said their growth is approaching stall-speed amid worries about tariffs.
A couple reports on Wednesday gave a mixed read on the U.S. economy’s strength. One suggested U.S. employers pulled back on their hiring sharply last month and added fewer workers than economists expected. The report from ADP could be a warning signal ahead of the more comprehensive jobs report that’s coming Friday from the U.S. Labor Department.
A separate report said growth for U.S. finance, real estate and other businesses in the services sector is better than economists expected. Even though businesses said in the survey they’re confronting “chaos” and uncertainty because of tariffs, their growth accelerated last month, according to the Institute for Supply Management.
Altogether, a recent stream of weaker-than-expected reports on the U.S. economy has raised the possibility of a worst-case scenario known as “stagflation.” It’s something that doesn’t happen often, where the economy is stagnating and inflation is high, and policy makers at the Federal Reserve don’t have a good tool to fix it.
For his part, Trump said in an address before Congress Tuesday night that he’s going ahead with tariffs, with more on track to go into effect on April 2, even if they cause “a disturbance.”
“Tariffs are about making America rich again and making America great again,” he said. “And it’s happening and it will happen rather quickly. There will be a little disturbance, but we’re OK with that.”
On Wall Street, Brown-Forman jumped 9.9% after the company behind Jack Daniel’s reported stronger profit for the latest quarter than analysts expected. Perhaps more importantly, CEO Lawson Whiting also said his company isn’t changing its forecasts for upcoming sales, even as “we anticipate continued uncertainty and headwinds in the external environment.”
Whiting said the decision by Canadian provinces to take U.S. whiskeys off their store shelves “worse than a tariff because it’s literally taking your sales away,” adding that the action is “a very disproportionate response to a 25% tariff.” Whiting did note, however, said that Canada accounted for only 1% of Brown-Forman’s total sales and could withstand the impact.
On the losing end of Wall Street was Campbells. The food company fell 2.1% after cutting some of its financial forecasts, citing discouraging trends for its snack products
In the bond market, the yield on the 10-year Treasury rose to 4.27% following the report on U.S. services businesses from 4.18% just before. That helped it recover some of its sharp slide since January, when it was approaching 4.80%, after worries about the economy’s growth weighed on yields.
The U.S. economy closed out last year running at a solid pace. If it were to weaken sharply, the Federal Reserve could cut its main interest rate in hopes of making borrowing easier and goosing the economy. But such moves typically also put upward pressure on inflation. If prices for eggs and other everyday items are rising because of tariffs, that could box in the Fed.
In stock markets abroad, indexes rose across much of Asian and Europe.
Indexes rose 2.8% in Hong Kong, 1.2% in South Korea, and 1.6% in France.
Germany stocks rallied by 3.4% as the prospective partners in the country’s next government said they want to loosen rules that would allow for more debt.
Stocks outside the United States have been doing better than the S&P 500, even with Trump’s America-First policies.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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