Market sentiment soured significantly as investors grappled with the latest developments in the ongoing trade conflict between the United States and China. Concerns over escalating tariffs overshadowed earlier optimism, leading to broad declines in equity markets as the trading week neared its close.
US Stocks Retreat Amid Trade Worries
Wall Street experienced notable losses at the start of Friday’s session, reflecting heightened anxiety over international trade relations. The S&P 500 index decreased by 0.7%, while the Dow Jones Industrial Average registered a substantial drop, and the Nasdaq Composite fell by 0.4%. These declines effectively erased some gains made earlier in the week following President Donald Trump’s announcement of a temporary 90-day delay on certain planned tariffs, a reprieve that notably did not extend to Chinese imports.
The negative market reaction intensified following China’s response to US trade policies. Beijing announced significant tariff increases on American products, with rates reaching as high as 125%. This retaliatory measure underscored the severity of the trade dispute. Adding to the uncertainty, the White House later clarified that tariffs on Chinese goods would actually be set at 145%, a higher figure than initially suggested by President Trump.
Indicators Point to Economic Fear
Market indicators clearly signalled growing investor apprehension. The price of gold, often seen as a safe-haven asset, moved higher, while the US dollar weakened. The yield on the benchmark 10-year U.S. Treasury note settled around 4.40% on Friday, reflecting pressure within the debt market. This yield had approached 4.50% mid-week, indicating significant volatility. The bond market’s behaviour is often interpreted as a barometer of confidence in economic policy, and President Trump himself acknowledged its sensitivity when justifying the partial tariff pause, noting the bond market felt “somewhat dizzy.”
Global Markets React
The uncertain trade environment impacted global markets:
- European indices were mostly lower, with Germany’s DAX falling 1% and France’s CAC 40 down 0.4%.
- Conversely, the UK’s FTSE 100 gained 0.5%, buoyed by domestic economic growth data reported for February, prior to the latest tariff escalations.
- In Asia, Japan’s Nikkei index saw a significant 3% drop, and South Korea’s Kospi declined 0.5%.
- Chinese stock markets, however, showed resilience, with the Hang Seng index rising 1.1% and the Shanghai Composite gaining 0.5%, potentially reflecting positive diplomatic signals from President Xi Jinping.
Skepticism Clouds Tariff Pause
Initial relief following President Trump’s tariff delay announcement proved short-lived. By Thursday, Wall Street had already experienced a sharp downturn, with the S&P 500 losing 3.5%. Market participants grew increasingly skeptical about the substance of the pause, viewing it more as a temporary tactic than a fundamental shift in policy, especially given the exclusion of China and the subsequent clarification of even higher tariff rates.
Commodity and currency markets also reflected the tense atmosphere. US crude oil prices saw a modest increase, trading around $60.54 per barrel, while Brent crude also edged higher to approximately $64.73 per barrel. In currency markets, the US dollar weakened against the Japanese yen, trading at 142.58 JPY, while the euro strengthened against the dollar, reaching $1.1380. Overall, the week concluded with significant volatility, dominated by the unpredictable trajectory of the US-China trade war.
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