Trump Retreats on Powell Threat, Markets React Positively Amid China Trade Optimism

 

President Donald Trump’s unprecedented tariffs—especially those targeting China—and his recent criticisms of Federal Reserve Chair Jerome Powell sparked concern among top advisers and major U.S. CEOs. Sources familiar with internal discussions said these leaders warned of potential financial turmoil and empty store shelves if the situation escalated.

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Those warnings, coupled with the week's market volatility, appeared to resonate. On Tuesday, Trump retreated from his threat to remove Powell, telling reporters in the Oval Office, “I have no intention of firing him.”

The statement was met with relief on Wall Street. After a market rally on Tuesday—fueled by Treasury Secretary Scott Bessent’s comments about plans to ease trade tensions with China—stocks climbed again on Wednesday.

According to sources, senior administration officials were also reassured by Trump’s remarks about Powell. They had been growing uneasy over the president’s confrontational tone and concerned about a prolonged legal battle if Trump tried to oust the Fed chair.

The Dow closed up by 420 points (1.07%), while the S&P 500 rose 1.67% and the Nasdaq Composite jumped 2.5%. However, the indexes finished below their intraday highs. Earlier in the day, the Dow had surged nearly 1,200 points before retreating after Bessent cautioned that rebalancing trade with China could take time. Speaking at an Institute of International Finance event, Bessent said the process could take “two to three years,” according to a source, confirming reports by Bloomberg News and CNBC.

His comments highlighted the continuing challenges, despite investor optimism and the desire of CEOs for tariff clarity.

White House Press Secretary Karoline Leavitt said Wednesday on Fox News that there would be “no unilateral reduction in tariffs against China.”

“The president has made it clear that China must reach a deal with the United States,” Leavitt said. “We’re optimistic that will happen. Ultimately, the decision on China’s tariff rate rests with the president.”

Speaking to reporters on Wednesday, Trump expressed confidence in reaching a “fair deal” with China, adding that trade talks with various countries were “going very well.”

When asked outside the White House whether discussions with China were ongoing, Trump replied, “Actively. Everything’s active.”

“Every country wants in,” he added. “Even those that have taken advantage of us for years. China’s one example, but so is the European Union. Those days are over.”

Meanwhile, U.S. Treasury bonds experienced a brief rally on Wednesday before reversing. The yield on the 10-year Treasury note dipped below 4.3% in the morning before rebounding to nearly 4.39%, just under Tuesday’s closing level. (Bond yields move inversely to prices.