Wall Street held relatively firm on Tuesday following President Donald Trump’s latest tariff escalation and after the Federal Reserve hinted interest rates may not change for a while.

The S&P 500 was virtually unchanged and edged up by less than 0.1% in the market’s first trading since Trump announced 25% tariffs on all foreign steel and aluminum coming into the country. The Dow Jones Industrial Average added 123 points, or 0.3%, and the Nasdaq composite slipped 0.4%.

The moves were modest not only for U.S. stocks but also in the bond market, where Treasury yields rose by only a bit.

The threat of a possible trade war is very real, of course, with high potential stakes. Most of Wall Street agrees that substantial and sustained tariffs would push up prices for U.S. households and ultimately lead to big pain for financial markets around the world. The European Union’s chief, Ursula von der Leyen, said on Tuesday that “unjustified tariffs on the EU will not go unanswered — they will trigger firm and proportionate countermeasures.”

But trading remained mostly calm in part because Trump has shown he can be quick to pull back on such threats. That’s what he did earlier with 25% tariffs he had announced for all imports from Canada and Mexico, suggesting tariffs may be merely a negotiating chip rather than a true long-term policy. That in turn has much of Wall Street hoping the worst-case scenario may not happen.

“The metal tariffs may serve as negotiating leverage,” according to Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.

In the meantime, much of Wall Street’s focus on Tuesday swung to a different part of Washington. Federal Reserve Chair Jerome Powell said again in testimony on Capitol Hill that the Fed is in no hurry to ease interest rates any further.

The Fed had cut its main interest rate sharply through the end of last year, hoping to give a boost to the economy. But worries about inflation potentially staying stubbornly high have forced the Fed and traders alike to cut back expectations for cuts in 2025. Some traders are even betting on the possibility of zero, in part because of worries about the effects of tariffs.

“We’re in a pretty good place,” Powell said about where the economy and interest rates are currently. He said again he’s aware that going too slowly on rate cuts could damage the economy, while moving too quickly could push inflation higher.

— Associated Press