Investors expressed relief as U.S. President Donald Trump reiterated his commitment to tax reductions during a significant speech to Congress. However, they also showed apprehension due to his ongoing emphasis on tariffs and his suggestion to eliminate a subsidy for semiconductor chip production.
At a crucial time for the financial markets, which have shifted from post-election enthusiasm to concern about Trump’s policies dampening economic growth and fueling inflation, the President’s speech was notably impactful.
In his address on Tuesday, Trump called on Congress to make his 2017 tax cuts permanent, a move that has generally been well-received by the investment community. Nonetheless, he announced plans to implement reciprocal tariffs starting April 2, a strategy that might destabilize the financial markets.
“Market volatility regarding tariffs is expected to persist because it seems there will be no policy change, nor does the U.S. appear ready to retract these tariffs,” noted Anthony Saglimbene, chief market strategist at Ameriprise Financial. He added that the reiteration of tax cuts by Trump is a positive signal for the markets.
Following the announcement of new 25% tariffs on imports from Mexico and Canada, as well as an increase in duties on Chinese goods to 20%, major U.S. stock indexes experienced a tumultuous session on Tuesday.
The S&P 500 .SPX has now surrendered its yearly gains and has dipped into the red for 2025. The Nasdaq Composite .IXIC also saw significant declines, dropping over 10% from its mid-December high at one point on Tuesday, although it later regained some ground.
During Trump’s address, there was a slight recovery in the dollar and U.S. stock futures.
“Reducing taxes… will boost business investment as long as companies believe there will be consumer spending,” said Michael Schulman, chief investment officer at Running Point Capital Advisors. He predicted that investors would generally respond positively as disposable income could increase if these policies are enacted.
Art Hogan, a strategist at B. Riley Wealth, pointed out that the most concerning part of Trump’s remarks was related to tariffs.
Another alarming issue raised during the address was Trump’s suggestion that the U.S. should repeal a pivotal bipartisan law from 2022, which allocated $52.7 billion in subsidies for semiconductor chip manufacturing, and instead use those funds to reduce debt.
“The potential rollback of the CHIPS Act is a major reversal,” stated Charu Chanana, chief investment strategist at Saxo.
This change could affect investment strategies, the robustness of supply chains, and the competitive edge of the U.S. in chip manufacturing. Chanana explained, “Companies that have been relying on government support for domestic production might rethink expansion plans, and international competitors could benefit. The market’s response will hinge on whether this represents mere political rhetoric or a real policy shift.”
Passionate about analyzing economic markets, Alice M. Carter joined THE NORTHERN FORUM with a mission: to make financial concepts accessible to everyone. With over 10 years of experience in economic journalism, she specializes in global economic trends and US financial policies. She firmly believes that a better understanding of the economy is the key to a more informed future.
