Tariff Pause Announced - Markets Soar, Recession Risks Fall
I’m home today feeling under the weather, but I couldn’t resist watching the markets and tracking this ever-evolving economic dynamic. I hate staying home sick, but I’ve been grateful for the chance to research, take notes, and reflect on what’s happening.
While watching CNBC in real-time, something remarkable unfolded. The markets began spiking unexpectedly—and even the anchor was scrambling for information. Within minutes, the Dow, S&P 500, and Nasdaq all surged. As I write this, the Nasdaq is now up over 10%.
What triggered it? According to news reports, Treasury Secretary Scott Bessent canceled a critical meeting with Congress to sit with the President, who then announced a pause on all tariffs—except those on China.
In all my years watching the markets, I’ve never seen something quite like this.
In my most recent article, I outlined three possible outcomes for the market based on the trajectory of tariffs:
An escalation of tariffs, which could trigger a recession
A compromise resulting in slower growth
A full or partial rollback, potentially fueling a sharp market recovery
From the moment the stiff tariffs were announced—effectively raising average rates from about 2% to nearly 18%, according to estimates from the non-partisan Tax Foundation—I believed the risk of recession had increased dramatically assuming the rates remained elevated indefinitely. That said, I was never fully convinced this was the administration’s ultimate objective, and today’s announcement confirms that suspicion. With this pause now in place, the odds of a recession are significantly reduced in my view.
This now narrows the possible outcomes to two more optimistic paths:
Slower growth, if some tariffs remain and trade tensions persist. If tariffs settle in around 10% or lower with most trading partners, growth may indeed slow—but the underlying fundamentals of the U.S. economy remain strong. With a resilient labor market, stable consumer spending, and healthy household balance sheets, I believe the economy is well-positioned to weather that mild drag without slipping into recession. Furthermore, in the absence of these tariffs, GDP was projected to grow by about 2% by many forecasters—so even a 0.2% hit to GDP would represent a manageable slowdown rather than a contraction.
Accelerating growth, if broader deals are reached and global trade stabilizes. If this ultimately leads to freer trade and more open markets, growth could accelerate beyond the current 2% baseline forecast. Reduced trade barriers tend to boost business investment, supply chain efficiency, and consumer access—all of which support stronger economic expansion.
As I mentioned before, the Tax Foundation has estimated that the total package of tariffs—including retaliatory tariffs—could reduce long-run GDP by 0.8%. That’s a meaningful slowdown, but it’s also reversible if policies shift. With today’s announcement, we’re already seeing markets price in a more favorable growth trajectory.
As I said in my last article, today reminds me a lot of the early days of the COVID-19 market crash—another period defined by artificial, government-imposed constraints. Back then, it was lockdowns. This time, it’s tariffs. Neither were driven by economic fundamentals, and in both cases, the markets behaved like a coiled spring, reacting sharply to uncertainty, and just as sharply when clarity returned. I feel vindicated today for having urged clients and investors not to sell into fear.
From the very beginning of this episode, I have said that this market decline was driven by raw speculation, not structural weakness. We’re now seeing what happens when even partial clarity begins to emerge. This is a powerful reminder: the worst market decisions often happen in the eye of the storm, when fear and noise drown out fundamentals.
The situation is still unfolding, and there may be more volatility ahead—but today marks a meaningful shift. We may finally be entering a more stable phase for the equity markets as trade negotiations continue.
More to come.
Disclosures:
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not a guarantee of future results.