Wall Street slips on escalating US-China trade war tensions

·       Trump indicated imminent ‘good news’, and urged to buy DJT; overall Chinese and Trump tone may be indicating the progress of back-channel talks

·       Gold surged on escalating Taiwan tensions and as China hits back at the US again with tit-for-tat tariff of Trump’s latest 50% on China

·       Fed may cut rates in May, June, and December’25, fully close QT and launch QE to stay ahead of the next GFC curve (synchronized global Trumpcession)

·       Potential synchronized global monetary and fiscal stimulus may cause higher inflation again down the road; resultant currency devaluation may also help Gold

On early Tuesday, April 8, 2025, Wall Street Futures surged on hopes of a reciprocal tariff deal between the US and China and postponement of Trump tariffs by 90 days. But by mid-Tuesday, it became clear that China would not succumb to Trump’s pressure and call the White House, begging for such a trade deal. China wants mutual respect in all dealings with the US and not any hegemony.

On early Tuesday, US Treasury Secretary Bessent denied the current capitulation of both Wall Street and Real Street is the main cause behind Trump’s potential blinking on reciprocal tariffs. Bessent said tariff negotiations are the result of massive inbound calls from over 50 countries, not the market and everything is on the table in tariff talks, but deals probably won’t be reached before the April 9 start date. He said Japan would get priority after swiftly reaching out to the US. Bessent has had some success steering the White House tariff messaging away from permanence and toward negotiations after warning Trump of further market losses. The US Secretary of State Rubio also discussed US reciprocal tariffs on India and how to make progress towards a fair trade relationship in a call with his Indian counterpart.

But China vowed to fight the trade war “to the end” and took steps to prop up its domestic markets (consumption). China increases measures aimed at stabilizing the stock market – the PBOC will provide more liquidity to back purchases by the country’s SWF while insurers will be allowed to dedicate more funds to the equity market.

Japan emerged on Tuesday as the first major economy (US trading partner) to secure priority tariff negotiations with Trump, highlighting its status as Washington’s biggest creditor and investor and triggering a 7% surge in Tokyo-listed stocks (ETFs). But US Business leaders are worried tariffs may reignite inflation and supply disruptions. Any massive retaliation could send the economy back to the conditions of 2021-22 when inflation was raging out of control.

Late Tuesday, Trump again wrote in his Truth handle, indirectly inviting China to call for the trade deal:

“I just had a great call with the Acting President of South Korea. We talked about their tremendous and unsustainable Surplus, Tariffs, Shipbuilding, large scale purchase of U.S. LNG, their joint venture in an Alaska Pipeline, and payment for the big-time Military Protection we provide to South Korea. They began these Military payments during my first term, Billions of Dollars, but Sleepy Joe Biden, for reasons unknown, terminated the deal. That was a shocker to all! In any event, we have the confines and probability of a great DEAL for both countries. Their top TEAM is on a plane heading to the U.S., and things are looking good.

We are likewise dealing with many other countries, all of whom want to make a deal with the United States. Like with South Korea, we are bringing up other subjects that are not covered by Trade and Tariffs, and getting them negotiated also. “ONE STOP SHOPPING” is a beautiful and efficient process!!!

China also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call. It will happen! GOD BLESS THE USA.”

Wall Street also tumbled after influential Fox News White House Correspondent Edward Lawrence tweeted:

·       To be more clear: When the tariffs go into effect at 12:01a April 9th. China will see an additional 104% added to imports. China missed its 12 Eastern Time deadline to remove retaliation tariffs set by President Trump.

·       White House Press Secretary says 104% additional tariffs went into effect at noon Eastern time because China has not removed its retaliation. The 104% additional tariff will be collected starting tomorrow April 9th

·       Treasury Secretary says 50 to 60, maybe even 70 countries have approached the administration to make a deal over tariffs.

·       Treasury Secretary Scott Bessent says the U.S. will not likely have any trade deals in place by April 9th to avoid the retaliatory tariffs going into place.

On Tuesday, The White House Press Secretary Levitt said

·       104% additional tariffs went into effect at noon Eastern time in China

·       Tariffs on China have not gone into effect yet

·       Italy's Meloni to visit on April 17th

·       Israel's PM Netanyahu pledged to eliminate US trade deficit

·       Nearly 70 countries have reached out to begin negotiations over US tariffs

·       President Trump has tasked Bessent and Greer to lead talks

·       Deals will be made if they benefit American workers and address trade deficits

·       President Trump met with a trade team Tuesday morning; he is also personally involved in trade talks/deals

·       President Trump Directed the team to have tailor-made trade deals with every country

·       Reciprocal tariffs will continue to go into effect as deals are negotiated

·       President Trump focused on ensuring deals are good for Americans

·       All options are on the table for each nation

·       Trump will talk to any country that calls

·       Trump believes the US can make iPhones

·       Trump expects tariffs will go into effect

·       Trump thinks the US has the workforce to make iPhones onshore

·       Trump will discuss foreign aid and military presence in nations as part of trade negotiations.

·       Trump directed the team to have tailor-made trade deals with every country

·       We see Iran moving in the direction of making a deal

·       Saturday discussions with Iran will be direct

·       Further tariffs on China to go into effect April 9th

·       Talks on Israel tariffs are ongoing

·       Trump is meeting with Republican lawmakers at the White House

·       We're going to prioritize allies and partners in tariff discussions

·       Trump believes China has to make a deal with the US

·       If China makes a deal, Trump will be gracious

·       A 10% universal baseline tariff will go into effect

·       Tariffs will go into effect as talks go on

On Tuesday, in the Senate Finance Committee Hearing, the USTR Greer said:

·       I have had several conversations with Japanese officials in the past week

·       The Trump administration wants more market access for agriculture

·       The Trump Administration is open to ideas from other countries to achieve reciprocal trade

·       China made significant changes early in the Phase 1 trade deal but did not comply in large part

·       Higher reciprocal tariffs will go into effect tomorrow

·       About 50 countries are speaking to the US about tariffs

·       China has not indicated that it wants to work towards reciprocity

·       I see a distinct difference between China and other countries that are seeking to negotiate

·       The price challenge from Trump’s tariffs will affect companies that are largely dependent on imports from China and Asia

·       The best way to have pricing certainty is to build products in the US

·       Reciprocal tariffs are generally lower in the Western hemisphere

·       Port fees on Chinese ships are not all going to be implemented, they are not all going to be stacked

·       Too many countries are dependent on exports to the US

·       Australia got the lowest rate available under the new regime

·       We should be running up the score on trade with Australia, which bans US beef and pork

·       Most countries have said they won't retaliate and they're seeking information on what steps they can take

·       The success of Trump's tariff strategy will be judged on a country-specific basis

·       An investigation is underway now on pharmaceuticals

·       We excluded pharmaceuticals and semiconductors from reciprocal tariffs because we think they need their investigations

·       Looking at a country's trade imbalance with the US is a good approximation of the net effects of its higher tariffs and unfair trade practices.

·       A lot of people are concerned about Wall Street, I am concerned about Main Street.

·       We can't have the status quo on trade, we need US manufacturing and market access abroad.

·       If we have companies that feel supply chain adjustment pain, that is something we have to do

·       I don't trust economists' predictions of tariff inflation because there was no inflation during Trump's first term.

·       We are willing to discuss how to implement a ban on imports of uranium from China.

·       The Commerce Department is considering whether a Section 232 critical minerals investigation is needed.

On Tuesday, Fed’s Goolsbee said:

·       Tariffs are much more than what we had been modeling

·       Tariffs are way bigger than anticipated

·       The Fed has to take the longer view, not like the stock market, which is volatile

·       There is disagreement among firms on how quickly or how much the tariff increase will get passed to consumers; it could lead to bankruptcies of suppliers

·       I can't wait for the GDP data to find out the investment impact

·       It's not obvious how the Fed would react to negative supply shock

·       Sentiment measures are almost cratering, that's a concern

·       The relationship between sentiment to spending isn't as strong as before

·       Businesses also aren't going to invest when it's not clear what the rules are

·       There is anxiety that high inflation will return

·       Tariffs on intermediate goods can damage the industry

·       Nearly unparalleled scenario where solid US economic data appears positive, but many uncertainties linger

·       fed policymakers hear anxiety

·       Hard economic data is still quite good

·       Anxiety-If tariffs are as large as announced, with counter-tariffs, could lead to supply disruptions, high inflation

·       Significant tariff retaliation could boost inflation

·       Global trade war eruption may lead to consumer behavior shift

·       if this evolves into a worldwide era of trade, and refrain from imposing significant tariffs on one another, it won't have this adverse effect

On Tuesday, the US Treasury Secretary Bessent said:

·       Trump to be directly involved in Japan negotiations

·       Japan Very Important Economic Ally

·       Japan will receive priority as it acted promptly

·       Approximately 70 countries have contacted us for discussions

·       We'll have a very productive conversation with Japan

·       Expecting Productive Negotiations on Non-Tariff Barriers

Trump’s reciprocal tariffs and counter-tariffs

On April 2, 2025, Trump signed an executive order imposing a 10% baseline tariff on all U.S. imports, with higher "reciprocal" tariffs applied to dozens of countries, including an additional 34% on Chinese goods. This built upon an existing 20% tariff on Chinese imports, bringing the effective rate to 54%. These tariffs officially took effect at 12:01 a.m. EDT on April 9, 2025.

In response, China retaliated by announcing a 34% tariff on all U.S. goods starting April 10, 2025, prompting Trump to further increase tariffs on Chinese imports by an additional 50%. This escalation, effective as of April 9, 2025, raised the total tariff rate on Chinese goods to 104%. Trump justified this move on social media, claiming China "panicked" and that the U.S. would win what he called an "economic revolution." The White House has framed these tariffs as a response to perceived trade imbalances and unfair practices, with Trump asserting that countries like China have been "ripping off" the U.S. for decades.

China may take new retaliatory measures to counter Trump's latest 50% tariff threats.

On early Tuesday, April 8, 2025, the Chinese authorities prepared at least six measures to respond to Trump's April 7 tariff threats of 50%. According to the Chinese report, the authorities decided to ban US movies from China, investigate the intellectual property benefits that US companies derive from doing business in China, and take retaliatory moves in the service trade sector. Additionally, China would significantly increase tariffs on US agricultural products, ban imports of US poultry, and halt bilateral cooperation on fentanyl-related issues.

This tit-for-tat escalation has triggered widespread market volatility, with U.S. stocks experiencing sharp declines and global leaders warning of a potential trade war. China’s Commerce Ministry condemned the U.S. actions as "unilateral bullying," vowing to "fight to the end," while also imposing export controls on rare earth minerals critical for high-tech industries. Economists and trade partners continue to question the methodology behind the tariff calculations, with some suggesting they are based on trade deficits rather than a precise mirror of foreign tariffs. The situation remains fluid, with reports indicating that around 70 countries have reached out to the White House to negotiate, though no specific resolution with China has been detailed as of now.

On early Wednesday, April 9, 2025, China firmly responded to the US imposition of a 104% tariff on Chinese imports. The Chinese Ministry of Commerce stated that while China does not seek a trade war, it is prepared to defend its interests if the U.S. continues to escalate tensions. The ministry criticized the U.S. actions as unilateral and coercive, emphasizing that trade wars yield no winners and pledging to protect the legitimate rights and interests of the Chinese people. In addition to verbal statements, China has implemented countermeasures, including imposing tariffs of 15% on U.S. coal and liquefied natural gas, and 10% on crude oil, agricultural machinery, and large-engine vehicles. Furthermore, China has expanded export controls on critical minerals essential for high-tech industries and added two U.S. companies to its Unreliable Entity List, restricting their trade activities and future investments in China.

Despite these measures, China has expressed a willingness to engage in negotiations, provided that the U.S. demonstrates mutual respect and equality in dialogue. However, as of now, there are no indications of formal trade talks between the two nations.

On Wednesday, China's State Council Information Office issued a white paper on trade and economic relations with the United States, criticizing Washington's ‘unilateral, bullying’ restrictive trade measures after the US imposed an additional 50% levies on Chinese products, sending the total tariff on Chinese imports to 104% (cumulative under Trump 2.0). China claimed that raising tariffs will not help Washington resolve its problems, insisting that reciprocal duties will damage the US and others' interests, according to the document. China further warned that it will continue to take measures to protect its rights and interests, and insisted that a dialogue is necessary to resolve the trade dispute, but one in which the US will act from a position of equality and respect.

China’s official media Xinhua said:

·       China plans meeting on US tariffs as early as today

·       China releases white paper on US trade & economic relations

·       China's top leaders to convene discussion on economic measures

·       China's top leaders to convene discussion on economic measures

·       China's Commerce Ministry: China has a firm will and abundant means, and will resolutely counteract and fight to the end

·       If the U.S. insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end

On Wednesday, China's Ministry of Foreign Affairs spokesman Lin Jian said:

·        China will not accept US pressure

·       So far, China has not appeared interested in bargaining. If the U.S. truly wants to resolve issues through dialogue and negotiation, it should adopt an attitude of equality, respect, and mutual benefit.

·       China's white paper on US trade says willing to communicate on issues such as economy, and trade.

China issued a White Paper on US-China trade relations.

On April 9, 2025, China’s State Council Information Office released a white paper titled "China's Position on Some Issues Concerning China-U.S. Economic and Trade Relations." This document was issued amid escalating trade tensions with the United States, particularly following President Trump’s imposition of reciprocal tariffs, including a total tariff rate of 104% on Chinese goods effective April 9, 2025. The white paper aims to clarify China’s stance on its economic and trade relationship with the U.S., articulate its response to recent U.S. policies, and outline its approach moving forward.

The white paper emphasizes that China-U.S. economic and trade relations are inherently "mutually beneficial and win-win," arguing that cooperation benefits both nations while confrontation harms them. It acknowledges natural differences and frictions due to the two countries’ distinct developmental stages and economic systems but asserts that these can be resolved through dialogue and consultation based on equality and mutual respect. China positions itself as a defender of free trade and multilateralism, criticizing the U.S. for unilateralism and protectionism, particularly through what it calls "trade bullying" via tariffs.

In direct response to Trump’s tariffs—including the initial 10% baseline on all U.S. imports, an additional 34% on Chinese goods (building on a prior 20%), and a further 50% hike after China’s retaliation with a 34% tariff on U.S. goods effective April 10, 2025—the white paper warns that such measures will not address U.S. domestic economic issues. Instead, it claims these tariffs will damage both American and global interests, disrupt supply chains, and undermine the multilateral trading system. China accuses the U.S. of using coercive tactics, such as citing national security or the fentanyl issue as pretexts for tariffs, and highlights its own "forceful countermeasures" to protect national interests, including export controls on rare earth minerals.

While China expresses a willingness to engage in dialogue—consistent with past efforts like the March 2025 talks between Vice Premier He Lifeng and U.S. Trade Representative (USTR) Jamieson Greer—it stops short of explicitly requesting a trade deal in this document. Rather, it underscores its resolve to "fight to the end" against what it deems unjust U.S. actions, asserting that it has both the will and means to counter effectively. The white paper also serves a strategic purpose: by framing the U.S. as the aggressor, China seeks to rally international support and position itself as a stabilizing force in global trade, even as it prepares for a potentially prolonged economic standoff with no immediate resolution in sight.

On April 9, 2025, China’s State Council Information Office released a white paper titled "China's Position on Some Issues Concerning China-U.S. Economic and Trade Relations." This document was issued amid escalating trade tensions with the United States, particularly following President Trump’s imposition of reciprocal tariffs, including a total tariff rate of 104% on Chinese goods effective April 9, 2025. The white paper aims to clarify China’s stance on its economic and trade relationship with the U.S., articulate its response to recent U.S. policies, and outline its approach moving forward.

The white paper emphasizes that China-U.S. economic and trade relations are inherently "mutually beneficial and win-win," arguing that cooperation benefits both nations while confrontation harms them. It acknowledges natural differences and frictions due to the two countries’ distinct developmental stages and economic systems but asserts that these can be resolved through dialogue and consultation based on equality and mutual respect. China positions itself as a defender of free trade and multilateralism, criticizing the U.S. for unilateralism and protectionism, particularly through what it calls "trade bullying" via tariffs.

In direct response to Trump’s tariffs—including the initial 10% baseline on all U.S. imports, an additional 34% on Chinese goods (building on a prior 20%), and a further 50% hike after China’s retaliation with a 34% tariff on U.S. goods effective April 10, 2025—the white paper warns that such measures will not address U.S. domestic economic issues. Instead, it claims these tariffs will damage both American and global interests, disrupt supply chains, and undermine the multilateral trading system. China accuses the U.S. of using coercive tactics, such as citing national security or the fentanyl issue as pretexts for tariffs, and highlights its own "forceful countermeasures" to protect national interests, including export controls on rare earth minerals.

While China expresses a willingness to engage in dialogue—consistent with past efforts like the March 2025 talks between Vice Premier He Lifeng and U.S. Trade Representative Jamieson Greer—it stops short of explicitly requesting a trade deal in this document. Rather, it underscores its resolve to "fight to the end" against what it deems unjust U.S. actions, asserting that it has both the will and means to counter effectively. The white paper also serves a strategic purpose: by framing the U.S. as the aggressor, China seeks to rally international support and position itself as a stabilizing force in global trade, even as it prepares for a potentially prolonged economic standoff with no immediate resolution in sight.

Preface-White Paper-China's Position on Some Issues Concerning China-U.S. Economic and Trade Relations

“As the world’s largest developing country, China is also the largest contributor to annual global economic growth. As the largest developed country, the United States boasts the largest economy in the world. The China-US economic and trade relations hold profound significance for both countries and exert a substantial influence on global stability and development.

Over the 46 years since the establishment of diplomatic relations between China and the US, bilateral trade and economic ties have developed steadily. The volume of trade between the two countries has surged from less than US$2.5 billion in 1979 to nearly US$688.3 billion in 2024. The China-US economic and trade cooperation has continued to expand, and improve, making significant contributions to the economic and social development, and well-being of the peoples of both countries.

However, in recent years, the rise of unilateralism and protectionism in the US has significantly impeded the course of normal economic and trade cooperation between the two countries. Since the beginning of trade friction between China and the US in 2018, the US side has imposed tariffs on Chinese exports worth more than US$ 500 billion. Furthermore, it has continuously implemented policies aimed at containing and suppressing China. The Chinese side has to take forceful countermeasures to defend its national interests. At the same time, committed to resolving disputes through dialogue and consultation, the Chinese side has engaged in multiple rounds of economic and trade consultations with the US side to stabilize bilateral economic and trade relations.

On January 15, 2020, China and the US signed the Economic and Trade Agreement Between the Government of the People’s Republic of China and the Government of the United States of America (also known as the Phase One Economic and Trade Agreement). Following its entry into force, the Chinese side upheld the spirit of the contract and endeavored to overcome multiple adverse factors, including the unexpected impact of the pandemic, subsequent supply chain disruptions, and global economic recession, to ensure implementation of the Agreement.

The US side issued several statements affirming the effectiveness of the Chinese side’s efforts. In contrast, the US side has continuously tightened export control, escalated sanctions against Chinese enterprises, and repeatedly violated its obligations under the Agreement.

Recently, the US side issued the America First Trade Policy Memorandum, the America First Investment Policy Memorandum, and the Report on the America First Trade Policy Executive Summary, imposed comprehensive additional tariffs on Chinese products, including tariffs citing the fentanyl issue as the pretext, announced “reciprocal tariffs”, levied an additional 50 percent on existing tariffs, and proposed.

Section 301 investigation restrictions- such as charging port fees; and targeting China’s maritime, logistics, and shipbuilding industries. These restrictive measures have escalated the problem, and again reveal the isolationist and coercive nature of US conduct. They conflict with the principles of the market economy, run counter to multilateralism, and will have serious repercussions for China's economic and trade relations. Following the fundamental principles of international law and relevant laws and regulations, the Chinese side has taken necessary countermeasures.

The US imposition of tariffs and other restrictive trade measures on its trading partners has artificially disrupted established global supply and industrial chains, undermined market-oriented free trade rules, severely hindered the economic development of various countries, harmed the well-being of both the American people and those of other countries, and negatively impacted economic globalization.

The Chinese side has always maintained that China-US economic and trade relations are mutually beneficial and win-win in nature. As two major countries at different stages of development with distinct economic systems, it is natural for China and the US to have differences and frictions in their economic and trade cooperation. It is crucial to respect each other’s core interests and major concerns and find proper solutions to resolve the issues through dialogue and consultation.

The Chinese government is issuing this white paper to clarify the facts about China-US economic and trade relations, and elaborate the position of the Chinese side on relevant issues.”

On early US Wednesday, China struck back at the US again and imposed 84% retaliatory tariffs in response to Trump’s 84% reciprocal tariffs (34+50%). The Chinese Finance Ministry announced that it is increasing the tariff on imports from the United States from 34% to 84%, in retaliation to the levy imposed on its exports by Washington. The new measures will come into effect on April 10. China also added six more US firms to the unreliable list and 12 more US entities to the export control list. But China also urged the US to cancel all unilateral tariffs and resolve trade disputes with China through dialogue. And China also escalated its complaints about US bullying to the WTO.

China said:

·       The US's practice of escalating tariffs on China is a mistake on top of a mistake, which seriously infringes on China's legitimate rights and interests, damages the rules-based multilateral trading system, and seriously impacts the stability of the global economic order. It is a typical example of unilateralism, protectionism, and economic bullying

·       The economy is resilient despite external factors

·       Chinese Mission, to WTO: China files new WTO complaint against further US tariff measures

·       Spokesperson of the Chinese Embassy in India: We're facing US abuse of tariffs, China and India should stand together to overcome the difficulties

On Wednesday, China's Premier Li (counterpart of USTR) said:

·       We should be aware external shocks to China's economic stabilization create some pressures

·       China's economy continues an upward recovery trend in Q1

·       We are prepared to deal with uncertainties

·       We need to implement more proactive macroeconomic policies

·       We will roll out new policies in a timely manner according to the situation's needs

·       Expanding domestic demand will be a long-term strategy

·       We should stimulate the vitality of business entities

On Wednesday, April 09, 2025, the US Treasury Secretary Bessent said:

·       China's 84% retaliatory tariffs unfortunate

·       China's escalation is a loser for them

·       They can raise their tariffs, but so what?

·       A very good step with the Chinese is to acknowledge fentanyl precursors

·       China needs to punish people exporting fentanyl precursors to the US

·       China needs to rebalance towards more consumption

·       China should not try to devalue their way out of this

·       China should come to the table

·       Bessent asked about removing Chinese stocks from US exchanges: Everything's on the table-- That will be Trump's decision.

·       China can raise their tariffs but so what?

·       Deregulation should let banks buy more treasuries

·       Strong Yen is a natural

·       China should not try to devalue their way out of this

·       It's Main Street's turn now, not Wall Street

·       The Treasury to take a greater role in financial regulation

·       There is a little uncertainty, but companies tell me that the economy is very solid

·       Economically, we're in pretty good shape

·       The tariff levels are a ceiling if other nations don't retaliate

·       We're overwhelmed with nations wanting to come to DC to negotiate

·       We have 70 negotiations lined up

·       I will take a lead negotiating role with the tariffs

·       China is the only nation that's escalated on trade

·       Spain's comment about aligning more with China would be 'cutting your own throat'

·       I can see a deal with allies, then they can approach China as a group

·       Discussions on tax bills going better than expected.

·       We want to deleverage the government sector and leverage the private sector

·       We are hopefully going to bring down debt to GDP by a percent every year

·       Tariff levels are a ceiling if other countries don't retaliate

On Wednesday, the JPM CEO Dimon said:

·       It is perfectly reasonable to say the trade was unfair

·       Sticky inflation will not go away quickly

·       If you want to calm markets, show progress on trade deals

·       I am hearing recessionary talk

·       I expect more credit problems than in a long time

·       I am not seeing defaults yet but I expect them

·       Probably a recession is the likely outcome

·       Sticky inflation will not go away quickly

The market is now concerned about an imminent issue of financial stability and the Fed may be forced to cut even in May, apart from June and December’25.

As per the WSJ report:

·       Trump Administration considers changes to China port fee plan after business pushback

·       Walmart pulls quarterly operating income forecast (guidance), citing Trump's tariffs

·       Trump Administration revises port-fee plan to soften blow to US exports, sources say

·       USTR to base fees largely on vessel capacity, sources say

·       USTR to ease charges on ships carrying agricultural exports

·       US now plans base port fees on Chinese vessel capacity

·       Trump Administration Revises Port-Fee Plan to Soften Blow to U.S. Export

·       Japan and G7 Chair Canada agreed to cooperate closely to maintain stability in global markets and financial system - Japan MOF.

·       Japan Finance Minister Kato held a phone call with their Canadian counterpart, both sides shared concern over US tariff measures.

On Wednesday, the EU slaps the US with tariffs from April 15 as a retaliatory measure for Trump metal tariffs:

The European Commission announced on Wednesday that all member states voted in favor of the proposal to pass trade countermeasures against the United States, which would affect €21 billion worth of US imports. Duties will begin to be collected on April 15.

EU Member States have voted in favor of the European Commission's proposal to introduce trade countermeasures against the United States.

“The Commission's proposal was made in response to the March decision by the US to impose tariffs on imports of steel and aluminum from the EU. The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy. The EU has stated its clear preference to find negotiated outcomes with the US, which would be balanced and mutually beneficial. Today's vote of approval by Member States means that – once the Commission's internal procedures are concluded, and the implementing act published – countermeasures will enter into force. Duties will start being collected as of 15 April. These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome.”

The EU duties will be implemented in stages, with additional waves for mid-May and December 1. Some products will be taxed at 25%, while others face 10% levies. Bourbon whiskey was removed from the list to avoid triggering a 200% US tariff on EU alcohol.

On Wednesday, Trump said:

·       This is a great time for firms to move to the US

·       Republicans in House must pass Tax Cut Bill

·       Productive call with Japan's Prime Minister this morning

·       This is a GREAT time to move your COMPANY into the United States of America, like Apple, and so many others, in record numbers, are doing. ZERO TARIFFS, and almost immediate Electrical/Energy hookups and approvals. No Environmental Delays. DON’T WAIT, DO IT NOW!

·       MAKE AMERICA GREAT AGAIN!

·       Republicans, it is more important now, than ever, that we pass THE ONE, BIG, BEAUTIFUL BILL. The USA will Soar like never before!!!

·       Republicans in the House must pass the Tax Cut Bill, NOW! Our Country Will Boom!!!

·       “Fixing Trade and Tariffs is a good thing!” Jamie Dimon, JPMorgan Chase, Chairman & CEO, on Maria B Show!

·       BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!

·       THIS IS A GREAT TIME TO BUY!!! DJT

Meanwhile, The Chinese Ministry of Culture and Tourism released a travel risk alert on Wednesday warning Chinese citizens about visiting the United States, citing "the deterioration of China-US economic and trade relations and the domestic security situation in the US." The ministry urged Chinese travelers to "fully assess the risks of traveling to the United States and be cautious."

Conclusions

Trump wants not only equivalent universal tariffs and VAT/GST (goods & service tax) on US goods or overall global trade, but also seeking free & fair access to foreign markets irrespective of developing or developed economies/countries. Trump is furious with China as President Xi or any other senior official didn’t care to call him, begging for negotiation even under Trump’s pressure and blackmailing (bellicose dealing) strategy.

China, on its part, is not ready for such a deal (TikTok for some discount in tariffs). China and its top political leadership do not like Trump’s pressure and negotiation tactics using trade, tech, and also Cold War as a weapon. And also due to domestic political compulsion, Chinese top leadership will never make any trade deal under Trump's pressure. China also knows that Trump will soon blink as Wall Street is capitulating and Real Street is voicing increasing protest (Hands Up rallies across the US) for his bellicose policies, especially regarding trade & tariffs.

China will never allow TikTok or something other as a bargaining chip for a trade deal with the US/Trump. China already signed a trade deal with the US under Trump 1.0 after two years of marathon negotiation just before COVID. Although Trump is now again trying to seal another China trade deal 2.0, China is not ready to succumb easily as it has diversified its export/trade significantly beyond the US and EU to Africa, Southeast Asia, and also Eurasia. China is not ready to succumb to Trump’s pressure, but has a "willingness to have serious talks" to resolve the trade dispute and suggested US/Trump admin should show "equality, respect and reciprocity" toward Beijing.

Trump is under huge pressure and also looking & sounding stressed amid the capitulation of Wall Street and Main Street. There are intense ‘Hands Up’ protests across America by Democrat supporters and also neutrals/general public. Even various prominent Republican Leaders & Senators are now openly voicing concern against Trump’s bellicose tariff policies. The public is scrambling to buy various goods for day-to-day life to beat Trump tariffs as all these tariffs will be eventually borne by US importers, producers, retailers, and ultimately consumers. This will inevitably affect US discretionary consumer spending, private CAPEX (investment), and economic growth. The US economy may be heading for a stagflation.

Trump is trying to reduce or balance the huge US merchandise trade deficit by imposing draconian tariffs on other countries and forcing manufacturers into the US. But to become a major global/local manufacturing hub and to compete with China, Trump needs China like manufacturing and logistical infra, which the US does not have at present and it will take substantial time, effort, and also investment to do that. Almost all of Trump’s $5 trillion private CAPEX is in the initial MOU stage. Private businesses are also worried about Trump policy uncertainty and thus becoming cautious in fresh CAPEX and hiring. Trump admin is now divided over Trump’s tariff policies as Tesla CEO Musk is also now criticizing it and termed White House Trade advisor Navarro as a ‘moron’.

Trump is now trying to isolate China on tariffs and trade issues, but in the process, Trump may be isolating the US on globalization and trade. Various countries not so friendly with China, like Japan, South Korea, and even India are now joining hands with China for trade, development, and prosperity rather than never-ending US hegemony. Trump has to compete with China by creating a comparable manufacturing and logistical ecosystem/infra, not by simply imposing tariffs after tariffs.

Thus Trump is now trying for a face-saving exit and may propose reciprocal tariffs (ad-valorem import duties) by 90 days without China as almost all other countries have called him except China. But before doing that, Trump may also call his close Friend Chinese President Xi, and offer a truce rather than a never-ending trade war, in which there is no winning side. Trump may also try to boost the morale of Wall Street and Real Street with his tax cut policy to neutralize tariff impact to some extent.

Bottom line

Trump’s comments about keeping patience amid Wall Street turmoil and urging traders/investors to buy DJT (DJ-30) along with the overall Chinese tone indicate back-channel negotiations between the two largest economies in the world, controlling almost 45% of global nominal GDP. The US and China may soon reach out to each other and call to resolve this trade issue. Trump may be also trying to force Fed rate cuts and lower YS bond yields with his bellicose trade war policies so that the overall cost of borrowing for the $40 trillion US public debt comes down considerably; it may be also YCC long with CCC (China Curve Control policy).

Now both the US, China, and even many other countries are preparing for both monetary and fiscal stimulus to fight an all-out trade war; if this happens, it may cause another wave of global inflation down the line and even a synchronized global Trumpcession.

Market impact:

On early Wednesday, Wall Street Futures were almost flat on escalating trade war uncertainty, but recovered from earlier Chinese retaliatory tariffs after Trump almost assured some good news is coming and thus traders should now take long positions in indices. But the market is also concerned about escalating geopolitical tensions between China and Taiwan/US as China threatened to crush Taiwan’s independence in response to US supply of F16s to Taiwan. China also issued a warning for its citizens to travel to the US under the current hot trade war situation. Gold soared on escalating  US-China trade war and also geopolitical tensions to some extent.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 38900) now has to sustain over 39500 for a further recovery to 39800/40000-40200/40700 and further rally towards 4100/41500-41700/42000 and 42700/42900-43200/43500 and 43700/44050 and 44250/44400-44500/44800 and 45000/45200-45300/45500 and even 45700/45800-45900/46000 in the coming days; otherwise sustaining below 39450, DJ-30 may again fall to 39100/38700-38000/36500-36200/33100 in the coming days.

Similarly, NQ-100 Future (17800) has to sustain over 18500 for a further rally to 19000/19500-20000/20900 and 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 18400, NQ-100 may again fall to 18100/15800-14100/13600 in the coming days.

Also, technically Gold (CMP: 3000) has to sustain over 3025 for a further rally to 3055/3075-3100/3150 and 3175/3186*-3200/3225; otherwise sustaining below 3015, Gold may again fall to 2990 and 2965/2955-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.