From Panic to Euphoria: S&P 500 Erases Post-Tariff Losses
- Just over a month ago, the S&P 500 was teetering on the edge of a bear market.
- Today, it has erased all of its 2025 losses.
What a turnaround.
Just over a month ago, the S&P 500 was teetering on the edge of a bear market. On April 8—days after President Donald Trump unveiled his “Liberation Day” tariff regime—the index closed 18.9% below its all-time closing high and was down 15% for the year. Fears of an all-out global trade war had markets in retreat.
Today, the S&P 500 is down just 5% from its peak. It has surged more than 17% in a matter of weeks, nearly wiping out its year-to-date losses and putting new highs within reach.
Trade Policy U-Turn
The catalyst for the rebound was a stunning U-turn in the Trump administration’s trade policy.
First, the White House paused its “reciprocal tariffs” plan for 90 days, keeping only a baseline 10% levy on most imports. Then, this past weekend, the U.S. struck a temporary truce with China, cutting tariffs from 145% to 30% for a 90-day negotiating window.
Markets took it as a clear signal that while tariffs may remain elevated relative to last year, they’re unlikely to stay anywhere near the extremes reached during Liberation Day and its immediate aftermath.
Back then, some investors feared the administration was preparing for a full economic decoupling from China and other key trade partners, a vision championed by advisors like Peter Navarro, who pushed for greater U.S. self-sufficiency in manufacturing.
Others argued that Trump was simply using sky-high tariffs as a negotiating tactic to extract better deals.
That view appears to have prevailed. And with it, market sentiment has undergone a dramatic shift, from bracing for a global trade collapse to betting on a fresh round of dealmaking.
S&P 500 Claws Its Way Back
With the S&P 500 inching back toward its February highs, the question now is whether the rally has more room to run.
If the trade war continues to de-escalate, markets may once again take cues from the post-election playbook: deregulation, tax cuts and pro-business policy. The White House is already pushing Trump’s “big, beautiful” tax bill as the next potential boost for the economy.
For now, the bears are back in hibernation.
