Could Trump Ignite a Stock Market Rally by Suspending Tariffs?

President Trump watches the stock market. If you want proof, all you have to do is look through his social media posts. Or you can watch his 2026 State of the Union message, where he proclaimed, "The stock market is at 53 all-time record highs since the election."

The president has seemed in the past to use the stock market as a barometer of sorts of his administration's performance. But that raises a question about what he might do if stocks are in a bear market as the November congressional elections draw near. Could Trump ignite a stock market rally by suspending tariffs?

Image source: Official White House photo by Shealah Craighead.

Bring back the bulls?

A reasonable case can be made that Trump could suspend tariffs and that his action would indeed spark a stock market surge. We saw this exact scenario play out several times last year. An acronym was even coined to describe the phenomenon: TACO (short for "Trump always chickens out.") Anytime the president eased back from levying steep tariffs, the stock market rebounded.

Should Trump suspend tariffs this year, would it cause stocks to take off? Probably. For one thing, many companies that have been absorbing part or all of the higher costs related to tariffs would experience an immediate earnings boost.

A tariff suspension could also give the Federal Reserve more flexibility to potentially lower interest rates, which would be great news for many stocks. Fed Chair Jerome Powell mentioned tariffs 24 times during his March 16, 2026, press conference. He stated unequivocally that inflation was higher as a direct result of the Trump administration's tariffs.

The obvious winners if Trump suspends tariffs include the stocks of companies that import clothes, such as Nike (NYSE: NKE), and those that import toys, such as Mattel (NASDAQ: MAT). Industrial stocks, including Caterpillar (NYSE: CAT) and Deere (NYSE: DE), would also likely benefit.

Perhaps not the catalyst you might expect

However, the suspension of tariffs might not be the catalyst that you might expect. Even if stocks rebounded initially, the momentum could be only fleeting.

One key reason why is that tariffs aren't the only headwind for the stock market. Geopolitical risks unrelated to trade policies pose an even greater challenge. The repercussions of the Iran conflict currently rank at the top of the list.

Some stocks benefit from tariffs. Their losses in a scenario where Trump suspended tariffs could at least partially offset the gains achieved by other stocks. We could see more of a sector rotation than an across-the-board rally.

Perhaps the biggest wild card, though, is that investors could doubt that the tariff suspension will be permanent. Trump has made it crystal clear that he wants tariffs. Any suspension would likely be widely viewed as a temporary tactic to lower the political heat on Republicans.

What should investors do?

It wouldn't be shocking if President Trump put some tariffs on hold over the coming months. However, betting on this happening isn't a smart investment strategy. What should investors do?

Make sure your portfolio is well diversified. Broad diversification gives you a cushion when some sectors underperform. Don't just diversify with any stocks, though. Invest in companies with financial strength and pricing power.

Most importantly, think long-term. However long tariffs remain in place, the best way to make money is to resist the temptation to sell just because volatility increases.

Maybe Trump will ignite a stock market rally by suspending tariffs; maybe he won't. Either way, building a diversified portfolio and adopting a long-term mindset can help you make money regardless of what happens in Washington, D.C.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Caterpillar, Deere & Company , and Nike. The Motley Fool has a disclosure policy.