In a surprising move, the Trump administration scaled back its aggressive trade rhetoric on Wednesday by pausing tariffs for 90 days on most nations excluding China. Market instability was seen as one of the drivers for the dialing down.  

The UBS global research team said that this shift suggests the U.S. is not pursuing trade battles with all partners—for now. Trump’s 90-day tariff delay led to knee-jerk reaction in markets on Wednesday, sending Wall Street to its best day since the 2008 financial crisis.  

However, despite the historic rally, analysts at UBS remain cautious. Although the risk of a severe market downturn—or "left tail" scenario—has diminished, concerns still linger, the asset manager noted.

The administration’s rapid pivot may have prevented deeper market damage and funding issues, but even these moderated tariffs are expected to weigh on economic growth, the investment bank said. For now, UBS believes it's smart to remain defensive, selling into rallies until there’s more clarity on future policy direction. 

“We believe even these reduced tariffs will imply a serious hit to growth. We expect negative earnings revisions to continue and create a headwind for the market. We don’t expect the highs to be tested and would recommend selling rallies until we learn more,” the UBS global research team stated on Thursday morning. 

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