Markets react to trade war developments and tariff adjustments

Global markets are on edge as the ongoing US-China trade war intensifies, with President Donald Trump reinforcing tariff hikes while China contemplates its next steps. Market sentiment remains volatile as investors assess the implications of potential policy shifts and stimulus measures.

China’s Growth Ambitions Face Tariff Pressure

Chinese President Xi Jinping reaffirmed China’s commitment to achieving its 5% GDP growth target, despite increasing tariff headwinds from the US. Beijing’s challenge is balancing economic stability with financial risks, particularly as new US tariffs rise to 20% on Chinese imports. Analysts warn that should Trump escalate tariffs further to the previously mentioned 60% level, it could cut up to two percentage points from China’s GDP this year.

To counteract this, Beijing may deploy massive fiscal stimulus, potentially injecting trillions of yuan into the economy. The Chinese government has also hinted at policy flexibility, with backup plans to support the economy if required. Measures may include increased infrastructure spending, financial relief for struggling sectors, and even a controlled devaluation of the yuan.

Trump Defends Tariffs Amid Economic Concerns

In a prime-time address, President Trump defended his aggressive tariff strategy, claiming it would generate “trillions” in revenue while recalibrating trade relationships. While he downplayed the economic impact, calling it a “little disturbance,” concerns about rising consumer prices and declining global trade persist.

The US stock market initially reacted negatively, with the S&P 500 seeing its worst two-day slump since December. However, investor sentiment improved following remarks from Commerce Secretary Howard Lutnick, who hinted at possible relief for Canada and Mexico, leading to a premarket rally in banking and automotive stocks.

Meanwhile, Trump’s administration continues to push a strong domestic energy agenda, touting future projects that may take years to materialize. Despite this, inflation concerns remain as trade barriers disrupt supply chains and raise costs for businesses and consumers.

Market Performance and Economic Indicators

Following the recent selloff, US futures showed signs of recovery:

S&P 500 Futures: +0.4%

Nasdaq 100 Futures: +0.5%

Dow Jones Futures: +0.5%

Stoxx Europe 600: +1.3%

10-Year Treasury Yield: 4.24%

Crude Oil: -1.9% to $66.98 per barrel

Gold: Steady near record highs at $2,914.01 per ounce

Bitcoin: Rose 2.8% to $89,985.92

Eurozone markets surged after Germany announced significant fiscal spending plans, fueling expectations of stimulus-driven growth. European bond yields rose as investors anticipated further intervention from the European Central Bank to manage inflation risks.

As geopolitical tensions and economic uncertainties evolve, market participants will be closely monitoring signals from both Washington and Beijing. Investors should prepare for continued volatility as trade negotiations and economic policies unfold.

DXY faces continued downside pressure

The US Dollar is under increasing downside pressure, dropping for the fourth consecutive trading day and reaching a low of 104.90. This decline has now surpassed the Time/Price method target mentioned in our previous reports. The dollar has lost more than 90% of the gains it achieved since the November election.

Currently, a weekly close below 105.50 would signal a significant shift in the medium-term outlook for the DXY, potentially leading to further declines towards 103.50. In the longer term, the outlook appears even more bearish, with a possibility of dropping to 100.0 once again.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

Disclaimer
This is a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. The information contained herein does not constitute a personal recommendation and does not consider your personal investment objectives, investment strategies, financial situation or needs. Squared Financial makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on a recommendation, forecast, or other information supplied by Squared Financial.

The information on this site is not intended for any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.