President Donald Trump’s trade war rattled global markets anew yesterday as stocks and oil prices sank amid fears China may once again respond in kind with higher tariffs to match the latest levies imposed by the US. Battered global markets and anxious global leaders welcomed Wednesday’s reprieve when Trump suddenly decided to freeze most of his hefty new duties for 90 days.
US Treasury Secretary Scott Bessent tried to further assuage sceptics by telling a meeting of Trump’s cabinet that more than 75 countries wanted to put in place a process for trade negotiations, and Trump himself expressed hope of a trade deal with China. But the uncertainty in the meantime extended some of the most volatile trading since the early days of the Covid-19 pandemic.
The S&P 500 index ended 3.5 per cent lower yesterday, while the Nasdaq dropped 4.3pc and the Dow Jones Industrial Average was down 2.5pc. Oil prices fell more than 3pc.
The S&P 500 is down about 15pc from its peak, and analysts believe stocks are in danger of falling into a bear market due to the uncertainty surrounding tariff policy.
“This has gone from a disorderly selloff to hopefully back to more of an orderly selloff because recession risk is much, much higher now than it was a couple weeks ago,” said Adam Hetts, global head of multi-asset at Janus Henderson in Denver.
Bessent predicted that striking deals with other countries would bring more certainty to trade policy over the next 90 days, once “we go through the queue and settle with these countries” which he said would present more favorable terms.
“I don’t see anything unusual,” he said of the day’s market activity.
The US and Vietnam agreed to begin formal trade talks after Bessent spoke with Vietnamese Deputy Prime Minister Ho Duc Phoc, the White House said.
Trump told reporters at the White House he thought the US could make a deal with China, but he reiterated his argument that Beijing had “really taken advantage” of the US for a long time.
“I’m sure that we’ll be able to get along very well,” Trump said, adding that he respected Chinese President Xi Jinping. “In a true sense he’s been a friend of mine for a long period of time, and I think that we’ll end up working out something that’s very good for both countries.” While announcing a 90-day tariff pause on dozens of countries, Trump ratcheted up tariffs on Chinese imports, raising them effectively to 145pc when levies imposed earlier this year are taken into account.
China has been raising its tariffs on the US with each Trump increase, raising fears that Beijing may jack up tariffs above the current 84pc.
China rejected what it called threats and blackmail from Washington and pledged to follow through to the end if the US persists, Commerce Ministry spokesperson He Yongqian told a regular press briefing. China’s door was open to dialogue, but this must be based on mutual respect, the ministry said.
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