On Thursday, US stock markets were rocked. Independent investors concerned about increasing trade conflict with China and the effects on our economy. As measured by the S&P 500, the market dropped almost 2.3%, indicating that investors were decidedly on edge. The Dow Jones Industrial Average dropped 700 points, or 1.7%, by 15:35 CEST, and the Nasdaq composite declined by 2.7%. Earlier this month, President Donald Trump raised tariffs on most Chinese imports to 25 percent. They currently are at a jaw dropping 125%.
This pullback in the stock market reflects larger worries about the negative economic effects of increased trade barriers. The S&P 500 remains well short of where it stood prior to Trump’s announcement of assaulting, earth shifting tariffs. He dubbed last week ‘Liberation Day’. This unpredictability has triggered major investor concern, resulting in large fluctuations in intra-day trading.
Market Reactions to Tariff Increases
President Trump has escalated his war on China, slapping billions of dollars in tariffs on goods brought in from the world’s second largest economic power. Consequently, traders are keeping a wary eye on the fallout of these policies and how they will contribute to or detract from market stability. Many experts suggest that increased tariffs may hinder economic growth and consumer spending.
The market’s response has bloody, dramatic, and immediate. After Trump announced a temporary halt on most worldwide tariffs, the S&P 500 shot up by a massive 9.5% – helping create a historical bull market. That optimism was short-lived when concerns over ongoing trade disputes bubbled back up to the surface. The index almost fell into a bear market itself last week, falling almost 20% under its all-time high.
“Everything is still very volatile, because with Donald Trump, you don’t know what to expect.” – Francis Lun, chief executive of Geo Securities
Treasury Yields and Economic Pressure
The stock market now has even more problems. The yield on the 10-year Treasury appears to be stabilizing after spiking to nearly 4.50% during what was a very volatile morning on Wednesday. It was up considerably from 4.01% at the end of last week. A yield of 4.31% was recently reported on Thursday, indicating a little bit of peace in the storm across bond markets.
The backdrop of higher Treasury yields adds further pressure on the stock market. They raise borrowing costs for American families and entrepreneurs. This prospect is dangerous for our nation’s economic prosperity, as increased rates have a chilling effect on both consumer spending and business investment.
The European Union made headlines last week by temporarily suspending its own planned trade retaliation against the US for 90 days. His decision opens up a window for possible new negotiations given growing domestic pressure. China, on the other hand, has been very proactive in courting countries. They hope to challenge and beat back these trade policies in a unified front against Trump.
Global Market Implications
Such ripple effects, intended or not, of US trade policies are being felt progressively on a global scale. Japan’s Nikkei 225 pumped up by 9.1%, whilst South Korea’s Kospi jumped by 6.6%. Germany’s DAX returned gains of 5.6%. These international market movements highlight the interconnectedness of global economies and how US tariffs have prompted varying responses from other countries.
Even as markets have started to traverse these rough waters, investors are still tentative about the next chapter. Of late, we’ve been subjected to whipsaw movements occurring, not just day to day, but even hour to hour. This volatility has many folks scratching their heads when it comes to predicting the market’s next move.
Leave a Reply