When the U.S. stock market surged over 1,100 points overnight, the market thought it had emerged from the gloom. However, the reality is far from that simple. The Trump administration's latest tariff decision — not to impose an additional 125% punitive tariffs, but to maintain a 30% increase limit — injected a shot of adrenaline into market sentiment, but it feels more like a celebration after a false alarm rather than a true resolution of the crisis.
Finance Minister Bessent and trade representative Greer’s statements in Geneva have indeed temporarily relieved the market: the United States will not impose further 'blockade-level' tariffs. However, this does not mean that existing trade barriers are crumbling. A 25% tariff still weighs over most Chinese goods, while the newly established 10% baseline tariff will also remain.
This policy adjustment has allowed the capital market to find an emotional outlet, with the Dow Jones Industrial Average soaring, Treasury yields rising, and risk appetite returning. But as one analyst said, this rebound is built on the foundation of 'bad news being less bad than expected.' When the applause fades, reality begins to question: can the foundations of the U.S. economy support this dual game of politics and capital?
The mystery of growth remains unresolved, and tax reform may become the key to 'gambling for survival'.
The Federal Reserve has become extremely sensitive to the tension between inflation and growth, while the current fiscal policy resembles using debt to 'borrow from the future to pay for the present'. According to predictions from Yale’s budget lab, the current tariff system could cost the average American family $2,300 in income annually and drag down economic growth by 0.4% per year. Meanwhile, progress on tax reform remains slow with significant divergences.
The response from the U.S. Treasury market is more calm, even cautious. The rise in yields on 10-year and 30-year Treasury bonds seems to indicate a shift of funds 'escaping bonds and entering the stock market', but it actually conceals structural concerns about fiscal unsustainability. Stanford Professor Joshua Rauh points out: the current U.S. debt as a percentage of GDP is nearing 100%, and in the future, as much as 29 cents of every dollar of government spending may be used for interest payments, assuming interest rates remain moderate.
The bond market has already begun to reprice risk premiums. In the recent 30-year Treasury bond auction, foreign investors' enthusiasm has noticeably declined, which undoubtedly sounds alarm bells for the Treasury Department: investors' faith in 'U.S. Treasuries being risk-free' is wavering.
What sustains the 'optimistic turnaround' in the capital market?
Some analysts point out that the current trend in the U.S. stock market has already shifted from a short-term reaction to 'tariff news' to long-term expectations regarding the success or failure of the 'tax reform plan'. In other words, if the tax reform encounters obstacles or weakens the existing stimulus, the market rebound may be short-lived.
This transition, from 'trade easing' to 'tax reform implementation', is not a simple shift but resembles a high-wire balancing act. If the policies are not implemented smoothly and the debt ceiling cannot be raised in time, the next 'crack' in the market may be just around the corner.
For the Biden administration, the window of maintaining economic confidence and capital market stability is being rapidly compressed. The pause in tariffs is merely to buy time; the real challenges lie ahead.
From Mlion.ai's perspective on 'economic structural risks' and policy lags.
At the Mlion.ai platform, we have been tracking the correlation between global macro policy changes and capital markets for a long time. The current rebound in the U.S. stock market, although supported by 'policy easing', still lacks structural turning points in substantive economic recovery indicators.
Corporate profit expectations have not significantly recovered, and the uncertainty of tax reform has instead amplified the volatility of valuation premiums.
The central tendency of interest rate expectations is rising, credit expansion is difficult to sustain, and household debt pressure is increasing.
The government’s fiscal space is limited, reducing the likelihood of further large-scale stimulus.
External shock factors (such as the situation in the Middle East and energy fluctuations) have not yet retreated, and the compounded risks cannot be underestimated.
Based on AI's cross-modal modeling of policies, bond markets, stock markets, and inflation data, we find that if the central tendency of U.S. Treasury yields continues to rise, combined with ineffective tax reform, the structural risk of the S&P 500 will be higher than the market’s current expected Beta value. For asset management institutions and macro strategy researchers, this stage should focus more on the 'temporal misalignment' between policy execution efficiency and market risk pricing.
Tariffs are not the end, but the prologue: the global chain faces reconstruction.
It is worth noting that even though current U.S.-China economic and trade frictions have eased, this relief is essentially a 'tactical retreat' and does not imply a substantive relaxation of the great power game framework. Multiple signs indicate that the U.S. still retains the option to pressure tariffs on strategic industries and is attempting to promote the redistribution of the global supply chain through taxes, industrial policies, and diplomatic coordination.
The anomalies in Southeast Asia and Latin America markets, the renewed push for U.S. manufacturing return plans, and supply chain subsidies for specific sectors (such as semiconductors and clean energy) all point to a 'secondary reconstruction' of global trade structures in the coming years. In this context, Mlion.ai has strengthened tracking of on-chain investment data and foreign trade order data for intermediary countries (such as Vietnam, Malaysia, and Mexico) to assist in analyzing the supply-demand gap and investment premium distribution during the 'decoupling' process.
Conclusion: A strong market does not equal economic certainty; technical assistance is necessary to judge real turning points.
The rebound in U.S. stocks is a signal, but not necessarily a turning point. What the U.S. economy truly needs now is structural adjustment, reconstruction of fiscal discipline, and improvement in production efficiency, rather than the 'market hypnosis' brought about by a one-time relaxation of policies.
The pause in the tariff crisis alleviates short-term downward pressure, but the long-term structural deficit and growth contradictions continue to brew in the background. Whether policy makers, asset allocators, or ordinary market participants, all need to maintain caution regarding 'optimism about the economic outlook'; genuine data insights and risk modeling will become crucial tools for navigating through the fog in this era.
As an AI-driven economic intelligence platform, Mlion.ai continues to focus on policy semantic interpretation, fiscal space assessment, and dynamic simulation of debt sustainability, helping you extract clear logical clues from complex appearances and build a more robust macro perspective.
Disclaimer: The above content is for informational sharing only and does not constitute any investment advice!