Trump Calms Markets With Dovish Shift on Powell and China Tariffs

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•  22 Apr 2025
 

Markets are roaring back to life after former President Donald Trump’s latest remarks signaled a sharp turn in tone. Following Monday’s turmoil sparked by his harsh criticism of Federal Reserve Chair Jerome Powell, Trump is now stepping back, telling reporters at the White House that he has “no intention” of firing Powell. Despite frustrations over interest rate policy, Trump’s more dovish rhetoric is helping soothe investor nerves. “I’d like to see him be a little more active in thinking about rate cuts,” Trump said. “But I have no plans to remove him.”

This is a major shift from earlier reports, including one from The Wall Street Journal, which claimed that Trump’s inner circle had discussed the possibility of ousting Powell in recent months. However, such a move would face steep legal hurdles, as the law only allows a Fed chair to be removed for legal misconduct or breach of trust—not for policy disagreements. Powell himself has stated clearly he has no intention of resigning before the end of his term in 2026.

Trump, nonetheless, reiterated his belief that the Fed should be cutting rates soon: “We think it’s the perfect time to lower interest rates. We'd like to see the chairman act early or on time not late. Late is not good.”

In a separate and equally market-moving statement, Trump addressed the ongoing trade tensions with China. He dismissed the possibility of harsh new tariffs, saying the idea of 145% duties on Chinese goods is “very high” and unlikely. “It won’t be that high. It won’t be close to 145%,” Trump said. “It will come down significantly. But it won’t be zero. It was zero before.”

That comment alone was enough to reassure traders that a full-blown tariff escalation isn’t imminent. “We’re making good progress with China,” Trump added, noting that the U.S. intends to take a friendlier tone in negotiations, though he insisted, “At the end of the day, they still have to make a deal.”

Treasury Secretary Scott Bassent echoed that sentiment, telling reporters he expects a “near-term softening” in the U.S.-China trade war. He described the current tariffs as a “mutual embargo” that’s essentially choking trade between the world’s two largest economies.

The markets are loving the new tone. Futures on the Nasdaq are up around 2%, while the S&P 500 is climbing 1.8%, and the Dow Jones is up 1.5%. This comes on the heels of a powerful rally in the previous session, where major indexes surged up to 2.7%. Even bond futures are getting a boost from the policy shift.

As the dust settles, one thing is clear—Trump’s decision to cool the rhetoric around Powell and ease tensions with China is fueling renewed optimism. And for now, the markets are following his lead.