Treasury Secretary Scott Bessent said Apr. 7, that ongoing trade negotiations are not tied to last week’s stock market drop. He stressed that the talks are driven by international interest, not market reactions.

Bessent noted that after President Trump imposed major tariffs, more than 70 countries reached out to the White House to start discussions.

He clarified that the talks were triggered by these inquiries, not market behavior.

On Apr. 6, Trump announced that trade talks with Japan and others would begin soon ahead of the tariffs taking effect Apr. 9.

According to Politico, Bessent advised Trump to outline an “end game” to give markets more clarity.

🔗 Source: Axios

🧠 Food for thought

1️⃣ Historical market cycles show tariff shock followed by negotiation premium

The recent market reactions follow a historical pattern seen during previous trade disputes where initial shock gives way to optimism once negotiations begin.

During the previous Trump administration, the S&P 500 fell by an average of 5% on days when significant tariffs were announced, creating similar market turbulence to what we’ve witnessed recently 1.

This pattern extends back to the Smoot-Hawley Tariff Act of 1930, which triggered dramatic market declines and retaliatory measures from trading partners, ultimately prolonging economic recovery 2.

The current market reversal, with futures up 3% following negotiation announcements, demonstrates how investors price in worst-case scenarios during uncertainty but quickly recalibrate when diplomatic pathways emerge.

Recent trading volume reached its highest level in 18 years with approximately 29 billion shares traded, indicating how trade policy has evolved into a significant driver of market volatility 3.

2️⃣ Economic data shows stark contrast between tariffs and trade agreements

Research consistently demonstrates that tariffs reduce economic activity while negotiated trade agreements have historically boosted U.S. economic performance.

Free trade agreements have generally benefited the U.S. economy, with data showing a $6.4 billion surplus in goods and services with FTA partners compared to a $489.8 billion deficit with non-FTA countries 4.