Wild Swings in the Stock Market as China and EU Retaliate With More Tariffs

The stock market has continued to swing back and forth rapidly despite the trade war escalating rapidly. Yesterday, Wall Street saw one of the most volatile trading days as “fake news” of a tariff pause pulled the market from deep in the negatives to positive territory but then ended up closing red.

Today, the market was expected to plunge further this morning as China retaliated with 84% tariffs on U.S. goods overnight after the U.S. imposed 104% tariffs on China. The EU also retaliated, though it did so in a much more dovish way.

Stocks did not react too negatively, and many stocks started recovering instead. There’s a possibility that the market could still end up deep in the red today, as the trends have been very unpredictable in the past few days due to tariffs.

Here’s a market update as of 10:00 A.M (ET) today.

• The S&P 500 is up 29.29 points, or 0.59%.
• The Nasdaq Composite is up 201.13 points, or 1.31%.
• Dow Jones Industrial Average is up 218.37 points, or 0.58%.

China’s 84% Retaliatory Tariffs

China’s retaliatory tariffs have made things much more uncertain as the trade war could linger on for longer. It is possible that the U.S. could slap even higher tariffs than the 104% it now has on Chinese goods after the recent escalation.

China’s Premier Li said that the Chinese economy has continued on an upward recovery trend in Q1, though external shocks could create “pressures.” China added more U.S. firms to its unreliable list and there have been rumors of both China and Japan selling U.S. treasuries.

Speaking of treasuries, the yields have spiked significantly. The 10-year yield spiked above 4.5% momentarily as some investors no longer see the U.S. treasuries as fixed-income safe-havens.

In response to China’s tariffs, US Treasury Secretary Bessent said that they were “unfortunate.” He also said, “They can raise their tariffs, but so what?”

China also filed a new WTO complaint against further U.S. tariff measures.

EU’s Retaliatory Tariffs

EU’s retaliatory tariffs were more soft. The market expected tariffs against U.S. tech companies, but that did not happen. Instead, the EU is targeting red states and the Trump voter base in its first set of retaliatory tariffs. It imposed tariffs on only $23.2 billion of U.S. goods, though more could come later.

Comments From the Fed’s Kashkari

Minneapolis Fed’s Neel Kashkari made the following notable comments:

“There’s kind of a wash between the forces on interest rates from tariffs, so we should sit where we are.”
“The first priority must be keeping long-run inflation expectations anchored.”

“No monetary policy response, up or down, should be off the table.”

“The bar is higher for cutting rates even if [the] economy and labor market weakens.”

“Announced tariffs are much higher and broader than expected, resulting in larger economic effect and shock to confidence.”

“Near-term inflation will climb, purchasing power will go down, investment will likely be lower, GDP will be smaller due to tariffs.”

“Policy is tightening on its own, reducing the need to hike.”

Macros

• US Wholesale Sales came in at 2.4% month-over-month vs the forecast of 0.8%.
• US Wholesale Inventories came in at 0.3% month-over-month vs. the forecast of 0.4%.

Other Assets

• Gold has surged sharply by 3.4%.
• Crude Oil Futures are down sharply by 3.8%.
• Natural Gas Futures are down 0.7%.
• Bitcoin is up 1.6%.

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