U.S. stocks closed higher as investors shrugged off trade war rhetoric as simply part of negotiations.

China retaliated against President Donald Trump's 10% tariff on all Chinese goods, beginning Tuesday. It slapped tariffs of up to 15% on U.S. imports of coal and liquefied natural gas and 10% higher duties on crude oil, farm equipment and selected cars, effective Feb. 10.

However, stocks showed little reaction to the news after Canada and Mexico on Monday managed to delay their tariffs for at least a month. Trump is set to talk to Chinese President Xi Jinping on Tuesday about pausing tariffs, media reports said citing White House trade adviser Peter Navarro.

The broad S&P 500 index closed up 0.72%, or 43.31 points, to 6,037.88; the blue-chip Dow gained 0.3%, or 134.13 points, to 44,556.04; and the tech-heavy Nasdaq edged up 1.35%, or 262.06 points, to 19,654.02. The benchmark 10-year Treasury yield dipped to 4.517%.

Tallying up the trade war, so far

Wall Street's coming off a volatile session on Monday when Trump's 25% tariffs against Canada and Mexico caused a sell off that pushed the Dow down more than 600 points near the open. Initially, it looked like a full out trade war would erupt, with Canada announcing its own tariffs and Mexico considering some.

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However, sentiment turned around and stocks erased much of their losses by the close after Mexico agreed to provide more border support to delay the tariffs for a month to buy time for more negotiations. Canada later made a similar move, suggesting to some analysts that Trump's tariff threats are a negotiating tool.

Trump's trade war with Mexico and Canada is on hold for now, but Deutsche Bank analysts say the fight with China is fundamentally different.

"China's economic development in recent years, instead of moving it towards a consumer-oriented economy, has moved in the direction of a more advancedmanufacturing economy," they wrote in a note. "This is now causing consternation in the West, with China making strides in many high-value added capital goods. While the U.S. is still the second-largest goods producer, it has less than half of China's global share, with many U.S. allies also seeing significant drops in their manufacturing share over the past 30 years. This may now have gone too far. Access to cheaper goods is no longer a good 'trade' for the U.S. given the loss of economic security over production supply chains and technologies to a competing power."

That means "the U.S.-China trade war is likely to be fundamentally more enduring than the U.S.’s disputes with its neighbours," they said.

But even if more enduring, China has shown signs it wants to negotiate a pause. Trump and Xi are due to talk on Tuesday, reports said.

"It seems investors were a bit sceptical this was the start of a trade war," wrote Hubert de Barochez, senior economist at Capital Economics, in a report. "The peak-to-trough fall of nearly 2% in the S&P 500 (on Monday) was far from uncommon by past standards, and much less deep at the start of the trade war in 2018. Given Trump’s habit of using economic threats to reach unrelated objectives...such scepticism makes sense to us."

Corporate news

With tariff fears shunted aside for now, investors have moved back to company news. Some of the day's movers included:

• Google parent Alphabet said after the close its earnings in the last few months of the year beat analysts' expectations but its sales missed. Sales in its cloud-computing business, a closely watched segment, were also weaker than expected. Shares tumbled 6.71% in after-hours trading. On the earnings conference call, analysts will likely want to talk about artificial intelligence after China's DeepSeek said last week it built a competitive AI model on a small budget.
• Pepsico reported mixed quarterly results, with earnings topping analysts' estimates but sales missing as demand waned for its snacks and drinks in North America for the fifth straight quarter. Pepsico shares ended down 4.5%.
• Cosmetics maker Estée Lauder said it would cut up to 7,000 jobs and warned of a steeper sales decline to come. Shares slid more than 16%.
• PayPal beat analysts' earnings estimates in the final three months of the year, boosted by Venmo’s total payment volume, which jumped 10% from a year ago. It also issued a rosy outlook, but investors were concerned the company's operating margin shrank. Shares of the payment company tumbled more than 13%. 
• Pfizer topped Wall Street earnings estimates during the last three months of last year, thanks to COVID-19 product sales and cost-cutting measures that paid off. However, the drug maker's stock dipped 1.26%.
• Merck beat analysts' earnings in the last quarter of the year, helped by cancer-related sales, but its 2025 sales guidance fell short of forecasts. The shortfall reflects its decision to halt shipments of Gardasil, a vaccine that prevents cancer from HPV, into China beginning in February and going through at least mid-2025. Shares slid 9.07%.
• Palantir shares soared 24%, surpassing the $100 per share psychological milestone and notching a record high, after the software company said following Monday's market close it topped analysts' earning estimates in the final three months of last year.
• Online retail giant Amazon will report its quarterly results on Wednesday.

Bitcoin

Bitcoin continues to be whipsawed by the volatility in the stock market. The cryptocurrency was last down 3.54% to $97,891.11, below the key psychological $100,000 mark.

However, some analysts note there remains an underlying bullishness to the cryptocurrency with Trump in office.

On Monday, Trump announced a U.S. sovereign fund, which "has been met with significant approval, as investors see it as a foundation for future government purchases of bitcoin," said Jochen Stanzl, chief market analyst at UK-based trading platform CMC Markets. "This reflects the persistent appetite for risk, even amid the negative headlines surrounding Trump’s tariff policy."

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and  subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.