Fed and China: Trump's New Strategy to Calm the Market

The market only needs a jolt to be swept away. This time, it was Donald Trump himself who ignited the flames by suddenly softening his stance on two hot topics: the Federal Reserve and tariffs on China. "There is no plan to replace Jerome Powell," he declared, breaking from his earlier harsh criticisms. He also opened the door to a fall in tariffs on Chinese imports. These two soothing gestures immediately boosted the global financial markets, which were seeking reassuring signals. The Market and the Fed: The Change in Tone Calms Wall Street In a press conference, Donald Trump eased tensions on two sensitive fronts, stating, "I have no plans to replace Jerome Powell," contrary to all expectations. This statement contradicts his ongoing criticisms of the Fed chairman, whom he previously accused of undermining economic growth through overly restrictive interest rate policies. The president's conciliatory tone surprised many, especially when accompanied by a surprising olive branch on trade with China. Trump actually mentioned the possibility of a fall in tariffs, currently reaching up to 145% on some products from China. He explained: We need to negotiate a fair deal for both countries. This dual change has had an immediate impact on the market: The S&P 500 index rose by 1.9%, reflecting a rapid recovery in investor confidence; the Dow Jones index increased by 1.4%, significantly led by industrial stocks; the Nasdaq index climbed 2.8% thanks to expectations of a more predictable economic situation; Japan's Nikkei 225 index closed up by 1.7%, while European stock markets also followed with significant gains. Investors welcomed the change seen as a return to predictability after many months of mixed signals. Global Economic Consequences Need to be Predicted Beyond the immediate market reactions, these statements raise new questions about Donald Trump's overall economic strategy. While the U.S. president has long nurtured a narrative of economic confrontation with China and exerted unprecedented pressure on the Fed, his change in tone marks a turning point. Some analysts see this as an attempt to reassure the business community. For the International Monetary Fund, these political uncertainties remain a concern. The IMF lowered its 2025 global growth forecast to 2.8 percent, down from an initial 3.3 percent, citing persistent risks related to trade tensions and unpredictable policies. The independence of the Federal Reserve is still a point of caution. While Trump claims he does not want to remove Jerome Powell, his past raises concerns about future political pressure. This ambiguous stance may obscure the signals being sent to the market and international partners. Moreover, the easing of tariffs may not guarantee a resolution to the structural imbalance in China-U.S. trade. Some observers believe that Republican voters may see this change as a sign of weakness, while the financial community views it as a welcome pragmatism. The question remains whether these appeasement gestures are part of a sustainable strategy or just tactical adjustments. The coming months will allow an assessment of the consistency of this approach. Currently, the market has reacted positively, but the fundamentals of the economy are still subject to deep structural stresses.