Investing.com -- Wall Street’s main indexes, including the S&P 500, saw a reduction in earlier gains on Wednesday following comments from Treasury Secretary Bessent indicating that there was no unilateral offer from President Trump to cut China tariffs, and that a full trade deal with China could take up to three years to materialize.
The S&P 500, which had surged 2.75% earlier in the session, pared its gains to 2% after Bessent’s remarks. The initial rally had been fueled by optimism over a potential de-escalation in the U.S.-China trade war and President Trump’s softening stance on Federal Reserve Chair Jerome Powell’s tenure.
Investors had reacted positively to a Wall Street Journal report suggesting U.S. tariffs on China might be reduced to between 50% and 60%. The markets had also been buoyed by Trump’s comments on Tuesday, where he indicated he had "no intention" of firing Powell—a reversal from his previous statement that Powell’s dismissal couldn’t come "fast enough."
However, Bessent’s statements during a press briefing in Washington provided a more sober outlook, noting the proximity to a trade agreement with India but offering no definitive stance on Trump’s earlier remarks about potentially firing Powell. The lack of a clear unilateral offer to cut tariffs and the extended timeline for a comprehensive trade deal with China introduced a note of caution among investors.
The markets had initially welcomed the change in Trump’s tone regarding the Federal Reserve, as his criticism of Powell earlier in the week had stoked fears for the central bank’s independence, causing significant losses in U.S. assets, including stocks and the dollar.
As the trading session unfolded, the tempered gains in the S&P 500 reflected the complex dynamics at play in the ongoing trade negotiations and the perceived stability of U.S. monetary policy. While the immediate prospect of reduced tensions with China had provided a lift to market sentiment, the extended timeline for a full trade agreement and the ambiguity surrounding the Fed’s leadership introduced elements of uncertainty that moderated the day’s earlier optimism.