The US stock market saw an early rally on Tuesday, but later in the afternoon, the gains began to taper off as investors processed news of upcoming US-Japan tariff discussions and potential trade agreements. The S&P 500 and Nasdaq Composite experienced increases of 0.9% and 0.7% respectively, while Nvidia climbed around 2% in the afternoon trading session after earlier recording a 7% surge. The Dow Jones Industrial Average also rose by approximately 1.3%, gaining about 500 points, although earlier in the day, it had surged by more than 1,300 points.

Investors started reentering the market following a turbulent session on Monday prompted by President Trump's swift tariff actions, which resulted in the Dow plummeting by 350 points and the S&P 500 enduring a significant three-day decline. Sentiments improved after Treasury Secretary Scott Bessent announced the commencement of bilateral trade negotiations with Japan, reassuring investors about the administration's willingness to engage in tariff discussions. Despite initial concerns raised by trade adviser Peter Navarro, suggesting Trump's tariffs were non-negotiable, the market responded positively to the news.

In Asia, the Nikkei 225 index rebounded strongly, closing 6% higher in Tokyo after a recent drop to an 18-month low. This recovery was driven by optimism about potential US trade flexibility. However, fears of a trade war loomed large, especially following China's declaration that it would fiercely oppose US pressure tactics. The Chinese authorities vowed to retaliate if the US proceeded with imposing additional tariffs, escalating tensions.

Notable figures in the financial sector, such as JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink, have started expressing concerns about the repercussions of Trump's tariff policies. Even Elon Musk, CEO of Tesla and an advisor to President Trump, has subtly critiqued the tariff approach in recent days, joining the chorus of apprehension on Wall Street.