Global markets staged a historic, albeit short-lived, rally this week after US president Donald Trump announced a 90-day delay on incoming tariffs for most countries. Volatility eased and some rushed to declare a de-escalation, but that initial optimism seemed misplaced and stocks have plunged since.
After the immediate enthusiasm, investors recognised that a tactical delay is not a strategic reversal. The structure of the policy – moderated tariffs for most, but a 125% rate for China – does not signal a walk-back, only a recalibration amid some intense pressure from the bond market.
Far from temporary brinkmanship, the Trump administration appears to be in the midst of a dramatic shift: away from multilateralism, toward economic nationalism; away from open systems, toward selective decoupling. The market may have rallied on headlines, but the post-war global order is being redrawn in real time.
The latest measures impose a 10% tariff on imports from most countries, down from the higher rates initially proposed. But China is being hit with a stunning 125% tariff, cementing its position as an economic adversary in the eyes of Washington. While the rest of the world was granted breathing space, the message to Beijing, and to markets, is clear: decoupling is no longer just a possibility but a policy.
And yet, despite this, equity markets initially responded as if the threat had meaningfully receded. That reaction deserves scrutiny. A delay is not a resolution. The initial tariffs were described by Trump as “economic medicine” and the architecture of his approach remains intact. Even with a temporary softening of the timeline, the underlying logic remains one of confrontation, not reconciliation.
The challenge for investors is to avoid mistaking this pause for a genuine reversal. This might not be the opening act of a negotiation with a defined endpoint. To some, it increasingly looks like the deliberate unwinding of a global trading regime that has defined capital flows, corporate strategy and inflation dynamics for the better part of 80 years. And it may be part of a broader pattern of supply chain realignment, institutional retreat and rising economic nationalism that markets are still reluctant to fully price in.
Some on the street see the return of discipline behind the scenes. Treasury secretary Scott Bessent, a market veteran with deep macro credentials, is widely credited with steering the White House away from the brink. His fingerprints are all over the shift to a more structured tariff framework: 10% for most, a hard line for China and a clearer negotiating posture.
That shift in tone, along with the apparent sidelining of more hardline voices, has given investors hope that trade policy may now be guided by calculation rather than chaos.
But even if there has been a shift in tone and the grown-ups are indeed back in the room, that doesn't mean the long arc has changed. A tactical pullback in tariffs to relieve bond market stress isn't the same as recommitting to the rules-based system that underpinned post-war growth.
Leslie Vinjamuri, director for the US and the Americas Programme at Chatham House, said last month: “[Trump] has disrupted the foundations of the liberal international order.
"The US commitment to multilateralism, the transatlantic partnership and even the norm of sovereignty have been broken. In so doing, Trump has rejected a gradual US retreat and attempted to force a radical reordering of international relations.”
Structural shifts like this are hard for markets to digest. They unfold slowly. Their consequences, such as retaliatory tariffs, disrupted supply chains, inflationary pressures and slower global growth, don’t hit all at once. They don’t fit neatly into earnings models or central bank narratives. And because of that, there’s a risk that markets systematically underprice them.
We’ve seen this before. In recent memory, both Brexit and the early days of the US-China decoupling were initially treated by investors as noise – temporary, negotiable, reversible. They weren’t, but by the time consensus caught up, much of the adjustment had already happened, often painfully.
So what does this mean for long-term investors? Even though fundamentals seem sidelined, with markets whipsawing on each shift in Trump’s trade stance, this isn’t a call to dump global equities or hoard gold.
But it is a moment to ask some deeper questions about portfolio construction and risk. Are we too anchored in the past when thinking about globalisation, growth and market resilience? Are we discounting political risk simply because it’s hard to quantify? And are we mistaking temporary market rallies for real clarity on long-term fundamentals?
If nothing else, this episode should remind us that markets aren’t just pricing machines. They’re also mood rings. Right now, the mood seems to be swinging wildly between panic and denial, without much room for sober reflection. What's needed is to think clearly, invest patiently and remember that not every rally is a signal of underlying strength.
So rather than chasing every headline or trying to game the next tariff tweet, this is a good moment to step back and ask some tougher, longer-horizon questions.
Are portfolios too exposed to regions or sectors that rely on the continuity of global trade flows? Have we stress-tested assumptions about supply chain resilience, input costs or geopolitical volatility? Are our inflation hedges real or just theoretical? How might we rebalance to include assets that can weather prolonged political fragmentation, whether that’s through commodities, infrastructure or genuinely global businesses with pricing power?
And, perhaps most importantly, are we diversified not just across asset classes, but across ideas about what the world might look like in five or 10 years? These aren’t easy questions – but history suggests it’s the comfortable answers that tend to age the worst.