‘Art of the deal’ power move or a nervous recoil?

Investing.com -- Wednesday’s rally on Wall Street was one for the record books after President Trump delayed the harsh reciprocal tariffs on everyone but China.  The S&P 500 had its largest gain since 2008 at 9.5%, and the PHLX Semiconductor index had its strongest day ever at 18.7%, among other eye-popping stats.

At 1:18 PM ET, Trump unleashed the "truth heard 'round the world", triggering the massive rally.

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately,” Trump said.  “Conversely… I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”

With all the gloom and doom since last week, the timing was impeccable, ushering in a massive buying spree and short covering rally.

Was all this planned as a big, beautiful masterstroke, or did Trump cave after playing chicken with the market?

Some in the administration are trying to spin it as the ‘Art of a Deal', Trump’s famous book describing his aggressive negotiating tactics.

“Many of you in the media clearly missed The Art of the Deal,” Press Secretary Karoline Leavitt said following the news.  Treasury Secretary Scott Bessent noted, “this was [President Trump's] strategy all along. You might even say he goaded China into a bad position. They have shown themselves to be bad actors."

Even non-administration players praised the President.  Hedge fund manager Bill Ackman said, “This was brilliantly executed by President Donald Trump. Textbook, Art of the Deal.”  He added, “The benefit of President Trump’s approach is that we now understand who are our preferred trading partners, and who the problems are. China has shown themselves to be a bad actor.”

James Thorne, Chief Market Strategist at Wellington-Altus, said, “Trump has encouraged dialogue and reduced market tensions while isolating China with a significant tariff increase to 125%. Moreover, the move strategically mirrors the Chinese game of weiqi, a key element brought to light by Dr Kissinger.”

Others think the President caved to market pressure, specifically the bond market, which saw yields spike after initially trending lower.

“When the bond market collapsed, their whole narrative collapsed,” Marko Kolanovic, formerly the chief global strategist at J.P. Morgan told MarketWatch “Their first excuse was, ‘Oh well, it worked for bonds.’ … The bond market probably forced their hand.”

Trump essentially alluded to the bond market ‘getting a little queasy” when asked if the movements in the bond market prompted his decision to announce the 90-day pause.

“The bond market is very tricky,” Trump said. “I was watching it, but if you look at it now, it's beautiful. The bond market right now is beautiful. But I saw last night where people were getting a little queasy.”

Overall, Trump's move is being hailed as a victory, but understanding how and why it was made will be critical for investors going forward.