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Stocks Down After Trump Increases Tariffs as China ‘Violated’ Trade Truce

Stocks Down After Trump Increases Tariffs as China ‘Violated’ Trade Truce

Published: by Omor IE

Key Points

  • Trade tensions are once again heating up between China and the U.S.

  • The U.S. and China have both accused each other of violating the trade truce with restrictions.

  • This has rattled markets.

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President Donald Trump accused China of breaking a trade truce they agreed to back in May. This deal was supposed to cool down tensions as triple-digit tariffs were hurting various industries in both countries, and companies were feeling the bite. The U.S. dropped its tariffs to 30%, and China dropped its tariffs to 10%. However, Trump claims China is not holding up their end of the deal due to license problems for rare-earth minerals.

China has hit back and said that the U.S. had “discriminatory restrictions.” On top of that, no direct talks between Trump and Chinese President Xi Jinping have occurred since the truce.

Trump has now announced that the U.S. will be doubling tariffs on steel and aluminum imports from 25% to 50% starting Wednesday. Stocks have started the week in the red, since this new wave of trade tensions could spiral uncontrollably again.

Here’s a market update as of 10:30 AM (ET) today.

  • The S&P 500 is down 11.4 points, or 0.2%.
  • The Nasdaq Composite is up 4.8 points, or 0.02%.
  • The Dow Jones Industrial Average is down 246.37 points, or 0.58%.

Tariff War Round 2?

The Chinese Ministry of Commerce accused the U.S. of being discriminatory due to recent restrictions on AI chips and visa revocations of Chinese students. In turn, China said it will defend its interests.

If it remains the case that rare earth restrictions remain and both sides fail to reach a deal, it could spill over into another round of tariff escalations. Even if that does not happen, if the current tariff pause expires without a deal, that alone will cause significant pain.

Macros

  • U.S. Construction Spending month-over-month came in at -0.4% vs. the 0.2% forecast.
  • U.S. ISM Manufacturing Prices Paid came in at 69.4 vs. the 69.3 forecast.
  • U.S. Manufacturing PMI came in at 48.5 vs. the 49.5 forecast.
  • U.S. ISM Manufacturing New Orders Index at 47.6.
  • U.S. ISM Employment Index at 46.8.
  • U.S. S&P Manufacturing PMI Final at 52 vs. 52.3 forecast.

Comments From the Dallas Fed

The Federal Reserve’s Lorie K. Logan made the following notable comments:

  • “The risks from tariffs are higher unemployment and higher inflation, putting two Fed goals in conflict.”
  • “The key risk is if higher short-term inflation expectations become entrenched.”
  • “Monetary policy is well-positioned to wait and be patient. We’re well-positioned to act if risks materialize.”
  • “Market volatility and uncertainty could cause households and businesses to pull back.”
  • “If tariffs change inflation expectations, that would be significant.”
  • “Inflation is still somewhat above target.”
  • “Labor market stable.”

Other Assets

  • Gold Futures are up 2.46% to $3,397.
  • Crude Oil Futures are up 2.9%.
  • Natural Gas Futures are up 7.2%.
  • Bitcoin is down 1.1% to $104,531.

The image featured at the top of this post is ©Greg Bowker - Pool/Getty Images.

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