Trump Pauses Tariffs, S&P 500 Sees Volatility
The pause on tariffs is a temporary relief, but the ongoing trade war and its impact on the global economy remain a major concern, with the S&P 500's volatility reflecting the uncertainty and instability in the markets, as investors wait for a permanent resolution to the trade disputes.
President Donald Trump has announced a 90-day pause on new reciprocal tariffs, except for China, in an effort to alleviate market volatility and investor concerns, as the S&P 500 suffered its deepest loss since its creation in the 1950s.
The move, which lowers tariffs to 10% from 104%, is seen as a victory for the Trump administration's negotiation strategy, allowing time to negotiate new trade agreements. However, some experts warn that the shift in tariff policy may not be enough to fend off a recession, as the US economy is experiencing multiple shocks, including a trade shock, financial shock, and price shock.
China, on the other hand, has vowed to "fight to the end" against Trump's aggressive trade policy, with number two leader Li Qiang saying authorities are "fully confident" in the resilience of the Chinese economy. The trade war has already caused significant market volatility, with the EU announcing its own tariffs on US imports, including a 25% duty on corn and soybeans, while Canada has also imposed retaliatory measures.
The Chinese economy has been weakened since Trump's first term, and experts say it cannot withstand the impact of sustained high tariffs. Beijing is looking to offset falling US demand for Chinese goods through trade-in schemes or consumer subsidies, while also diversifying its relationships with countries in Europe, Africa, Southeast Asia, and Latin America, and promoting domestic self-reliance in technology.
As the trade war continues to escalate, investors are closely watching the developments, with the S&P 500 remaining volatile. The US dollar has fallen to a six-month low, and global markets are experiencing significant uncertainty, making it crucial for the Trump administration to negotiate new trade agreements and find a resolution to the ongoing trade war.