- U.S. slaps 125% tariff on China; retaliatory moves by China, EU, and Asia fuel fears of a global trade war and market instability.
- Treasury yields jump; Trump urges calm and signals tariff pause, helping Bitcoin rally past $81K amid recession and stagflation concerns.
- Trump claims multiple nations seek trade talks; Bessent defends tariffs as pro-manufacturing while markets weigh long-term fallout.
Volatility in global financial markets remained heightened after the United States imposed new tariffs on multiple trading partners. The trade conflict escalated sharply, with President Donald Trump’s administration passing a 125% tariff on Chinese imports.
The European Union also issued its countermeasures, announcing a 25% tariff on a list of American products seized at its borders, including soybeans, motorcycles, and beauty goods. Separate 24% and 25% tariffs were hit on Japan and South Korea. Consequently, these developments have raised market uncertainty and spilled over to impact equities, government bonds, and global commodity prices.
The Nasdaq 100 climbed 0.9% from mid Wednesday levels, but the S&P 500 and Dow Jones Industrial Average stayed nearly flat. This led to persistent lagging of the Russell 2000 index. Meanwhile, U.S. Treasury yields gained as U.S. 10-year note posted its biggest three day rise since 2001, as investors worry over higher inflation and troubles in Ukraine.
President Trump Calls for Investor Confidence
In response to the market reaction, President Trump made public statements trying to calm investors’ nerves. He wrote on his social media platform Truth Social, ‘BE COOL!’ It will all do well. “USA will be better and bigger than ever before!”
Their name seems to allude to Trump Media & Technology Group Corp. (DJT), but the Dow Jones Transportation Index has also lost since trading began unfolding. Trump again reiterated that his administration is in talks with key allies including Japan and South Korea and claimed countries keen to reach new deals. Trump, during a closed-door dinner with Republican lawmakers, boasted that several countries were now calling the U.S. to start tariff talks as America’s pitch in its current trade state. NFT founder tweeted, “ THIS AS A GREAT TIME TO BUY !!DJT!!!”
Still, Trump’s message on Truth Social that multiple countries reached out to discuss trade, tariffs, and currency eased investor worries about a stalemated trade war.
US Treasury Secretary Defends Policy Despite Recession Worries
Scott Bessent, Treasury Secretary, defended the administration’s trade policy in remarks to the American Bankers Association and in the media. U.S. exports far less to China than it imports, so China’s retaliatory tariffs are less significant in the relative sense, he dismissed concerns about.
According to Bessent, America’s direction is strategically centered on bolstering domestic manufacturing and putting ‘Main Street’ ahead of Wall Street. The goal is to rebalance trade, and every nation that aligns with China will bear the economic risk that creates.
Bessent says the U.S.’s talks with Vietnam have already begun and that other countries near China can also expect further talks. And he said that once the U.S. reaches agreements on both sides on those key allies, it could then work with its allies to address trade issues with China.
Stagflation and Market Uncertainty Loom Over Economic Outlook
However, on Wednesday, Bitcoin surged past $81,000 as the market sentiment started to recover following a surprise announcement from U.S. Trump, who announced a 90 day pause on new tariff and a temporary cut of the reciprocal tariff rate to 10 %, signaling a change of the U.S. trade policy.
The new tariffs produce short-term effects on equities, bond markets, and consumer prices that add to an already fragile economic outlook, while the administration foresees long-run benefits. The interest investors now demand to lend the U.S. government money for 10 years rose to 4.39%, as investors became more skeptical about U.S. economic stability in the face of further policy shocks.
