Tariffs were on, then they were off. At least temporarily, and only some of them — but not for China, which got hit with steeper duties and promptly hit back. Wall Street reeled, then rebounded to its strongest weekly gain in well over a year.
The past week has seen a head-spinning series of U.S. trade policy changes that economists, investors and ordinary consumers increasingly worry will drive up inflation or even trigger a recession.
“The economy is facing considerable turbulence,” JPMorgan CEO Jamie Dimon said Friday, when the bank reported strong earnings while warning of pitfalls ahead. Both JPMorgan — which sees 50-50 odds of a recession this year — and Morgan Stanley saw revenues jump from stock trading activity as investors raced to adjust their holdings in the face of growing uncertainty.
The major U.S. stock indexes ended on a high Friday after a volatile week of massive losses and gains. The eleventh-hour rebound came after White House press secretary Karoline Leavitt signaled that President Donald Trump is “optimistic” for a trade deal with China.
The Dow Jones Industrial Average closed up 4.9% on the week, while the tech-heavy Nasdaq Composite finished up 7.3%. The S&P 500 had its best week since November 2023, ending up 5.7%. That broad-based index was still down 5.5% since April 1, the day before Trump unveiled a sweeping slate of fresh tariffs.
While much of those new import taxes have been reduced for a few months, market watchers and finance executives say major economic headwinds remain.
“Timely resolution which benefits the U.S. would be good for businesses, consumers and the markets,” Wells Fargo told investors Friday about the global trade tensions. In the meantime, “we expect continued volatility and uncertainty and are prepared for a slower economic environment in 2025,” the bank said.
Larry Fink, CEO of the world’s largest asset manager, BlackRock, told CNBC on Friday that he thinks the U.S. economy is “very close, if not in, a recession now.” (An official determination on that front can only be made by a panel of experts at the National Bureau of Economic Research, usually months after the fact.)
Consumer sentiment, meanwhile, plunged 11% since last month, according to a reading Friday by the University of Michigan, the measure’s fourth straight month of declines.
“Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month,” the researchers wrote.
The survey was conducted before Trump changed his mind on the tariffs he’d unveiled just a week earlier, covering nearly 90 countries. He said he came to the decision because more than 75 of them didn’t retaliate and reached out to negotiate.
The temporary policy rollback, however, doesn’t apply to China. After Trump announced he was hiking tariffs on the country to 145%, Beijing retaliated Friday with 125% duties on U.S. goods.
Investors say they aren’t sure exactly how the global trade picture will shake out. Morgan Stanley said in a note Friday that Trump’s 90-day reprieve “merely extends policy uncertainty” and leaves effective tariff rates at century-long highs.
“While any delay of tariffs is beneficial on the margin, it is not the same as their removal,” they wrote. “History suggests that elevated and prolonged uncertainty that weighs on business confidence can have detrimental effects on business spending and hiring.”
Inflation eased more than anticipated in March, dipping to an annual rate of 2.4% in government figures published Thursday, and wholesale prices also cooled unexpectedly last month. But analysts were quick to discount the encouraging data.
“That was nice, but don’t get used to it,” Greg McBride, Bankrate’s chief financial analyst, said in a statement Thursday, citing widespread signs of unease across the consumer economy.
Experts are already warning that common purchases — from clothing and auto parts to grocery staples like coffee, nuts and seafood — remain on track to get pricier in the months ahead from tariffs. Price hikes are also in store for items extensively produced in China, including toys, video game consoles and electronics.
Barclays analysts said Thursday that retail and import data suggests many consumers “have front-run these tariffs to some extent by making heavy purchases in February and March,” looking to snag Chinese-made gadgets and other items produced abroad before prices rise. Foot traffic at warehouse clubs jumped nearly 10% in the last week of March, days before Trump’s April 2 tariff rollout, according to Placer.ai tracking data, which the company said could indicate a race to stock up.
The Barclays researchers said they expect price pressures to moderate over the course of the year “as firms trade less with China and source from the rest of the world, where we expect the average tariff to remain close to 10%.” But the bank still foresees inflation climbing to 4.1% overall by the end of this year.
“The economic tariff Armageddon unleashed by Trump last week has been the dark black cloud over stocks since this fiasco began,” Wedbush Securities analysts wrote in a note to clients Friday. The impact has mainly been felt on Wall Street so far, they said, but “that is all about to change.”
