DAX Rallies as Trump Halts Tariff Escalation, but Risks Remain

The DAX index surged 4.67% on April 10, 2025, its strongest single-day gain in years, as President Donald Trump announced a 90-day pause on punitive tariffs targeting most U.S. trading partners. The reprieve, excluding China, offered a fleeting respite from a trade war that had sent global markets into a tailspin. Yet beneath the rally lies a fragile equilibrium, with unresolved tensions over Beijing’s 145% tariffs and lingering doubts about the durability of Trump’s policy shift.

The Tariff Truce: A Fragile Rally

Trump’s decision to suspend tariffs on 90 countries—excluding China—reversed a week of panic that saw the DAX plunge 3% on April 9. The abrupt policy shift reflected mounting pressure from businesses and markets, which had recoiled at the prospect of a global recession. JPMorgan had warned of a 40% chance of a U.S. downturn, while Deutsche Bank analysts noted the “strategic independence” push by nations seeking to insulate themselves from U.S. trade whims.

The DAX’s rebound mirrored broader European relief, with the Stoxx 600 climbing 3.7%—its best session since early 2022. Industrial and tech stocks led gains, as automakers like BMW and Volkswagen rallied on hopes of normalized trade flows. However, the exclusion of China cast a shadow: Asian markets like Hong Kong’s Hang Seng remained in freefall, down 13% on April 9, while German luxury brands reliant on Chinese consumers faced an uncertain path.

Sectors on a Treadmill: Winners and Losers

The tariff truce offered uneven relief. Semiconductor stocks, exempt from initial levies, surged: ASML (AS:ASML) jumped 10.9%, while Infineon (DE:IFX) rose 6.4%. Tech giants like Apple (NASDAQ:AAPL) also rallied, up 15.33%, as supply chain fears eased temporarily.

Yet automakers and exporters remained vulnerable. Germany’s auto sector, which accounts for 20% of DAX earnings, faced a double whammy: U.S. tariffs on foreign cars (25%) and retaliatory levies from China. Daimler (DE:DAI) shares rose only 3% on April 10, underscoring lingering risks.

The China Conundrum: A Sword of Damocles

While the DAX celebrated the tariff pause, China’s exclusion looms as a critical threat. Beijing’s 145% tariffs on U.S. goods remain in place, and its retaliation against European exports could yet trigger a new wave of declines. German machinery exports to China, for instance, fell 18% in early 2025, a trend that may accelerate.

Analysts caution that the truce is tactical, not strategic. “Trump’s tariffs are a lever, not a policy,” said Jamie Cox of Harris Financial Group. “Markets will stay on edge until we see a path to resolution.”

Market Sentiment: Fear and Greed in a Volatile Dance

The CBOE Volatility Index (VIX), a gauge of investor anxiety, spiked to 50 earlier in April—levels last seen during the 2008 crisis—before retreating to 33 after the tariff pause. Treasury yields, meanwhile, surged to 4.3%, reflecting skepticism about the Fed’s ability to stabilize the economy amid trade turmoil.

Expert Outlook: Caution Ahead of the Storm

Economists warn that the tariff pause is a “band-aid on a bullet wound.” Larry Summers, former Treasury Secretary, labeled Trump’s policies “the worst self-inflicted economic wound since WWII,” citing a potential $660 billion annual tax burden on Americans. Ray Dalio of Bridgewater Associates urged extending relief to China, arguing that markets need “certainty, not whiplash.”

Conclusion: Rally or Mirage?

The DAX’s April 10 surge offers a glimpse of what markets could achieve with stable trade policies. Yet the index remains 14.1% below its February peak, and risks abound. China’s tariffs, retaliatory measures, and Trump’s unpredictable rhetoric ensure that volatility will persist.

Investors should focus on sectors insulated from trade wars, such as semiconductors and healthcare, while hedging against currency fluctuations and bond market instability. As Deutsche Bank analysts noted, “The truce is a start, but the war is far from over.”

In the end, the DAX’s recovery is a fleeting victory in a prolonged battle. Until trade policies stabilize—and China is brought to the table—the markets will remain hostages to the whims of a president who has mastered the art of chaos.