- Monday – Trump’s tariffs, China’s retaliatory tariffs 34%, US and China markets decline
- China has imposed export restrictions on rare earth elements
- Also, China has added US companies to its “unreliable list”
- Hang Seng Index is down 13.22%, CSI300 is down 7% – the biggest daily drop since 2008
- Tech company’s shares, including Alibaba and Tencent, fell more than 8%
- Global markets show declines including the Nikkei 225 (-7.83%), Kospi (-5.57%), and S&P/ASX 200 (-4.23%) and more
Trump’s tariffs, China’s retaliatory tariffs 34%, US and China markets decline, as well as global markets – all that looks even more dramatic than the end of last week and seems to be just the beginning. Hang Seng Index and CSI300 experienced the biggest daily drop since 2008, the same with US and global markets such as Daw Jones S&P 500, S&P/ASX 200, Nikkei 225, Kospi, etc. China’s largest technology companies including Alibaba and Tencent fell more than 8%.
All of this reflects the rapid tightening and opposition to Donald Trump’s tariffs, and China’s measures are making global trade even more difficult. In addition to tariffs on all US imports – China has imposed export restrictions on rare earth elements and added US companies to an “untrustworthy list.”
How Trump’s Tariffs and China’s Retaliation Impact Global Trade
Monday has arrived, and some are already calling it Black Monday 2.0, which may be an exaggeration but not entirely without basis. Specifically, the sweeping tariffs imposed by Trump last Friday hit the markets, but this Monday revealed the impact of China’s retaliatory 34% tariffs on all imports from the United States. Moreover, China introduced additional measures targeting critical infrastructure, namely export restrictions on rare earth metals. And, in its usual manner, China has gone further by directly impacting businesses by including several American companies in the “unreliable entities list.”
Such extensive mutual sanctions are fundamentally disrupting all trade agreements between various companies, breaking supply chains, and derailing plans across entire industries, and the numbers demonstrate this clearly. Specifically, this has affected virtually all markets worldwide:
Speaking of specific numbers, Monday immediately began with rapid declines, and notably, the Hang Seng Index dropped 13.22%, and the CSI300 fell by 7%, marking the largest single-day decline since the 2008 Global Financial Crisis, whose effects are still remembered today.
Additionally, several key Chinese companies on which much of the economy relies also suffered significantly, with daily losses exceeding 8%.
This is a mutual decline, as global and American markets are not doing well either.
- Dow Jones -11.03% last 5 days and -2.75% today
- Nasdaq -9.36% last 5 days and -0.01% today
- S&P 500 -10.58% last 5 days and -1.36% today
- S&P/ASX 200 -8% last week and -4.23% today
- Nikkei 225 -13.42% last 5 days and -7.83% today
- Kospi -7.29% last 5 days and -5.57% today
All of this is a rather dangerous situation, and whether this is part of a plan with a “transitional period” price, as Trump calls it, or whether it is an example of things going too far and should have remained at the level of threats instead of actual measures, remains to be seen.
What about this scenario, among other possibilities — Donald Trump may want to create a micro-crisis to lower the interest rate under which it would be more profitable for him to take out a loan to repay obligations.
Let me explain further: The facts are that the U.S. needs to pay off national debt obligations totaling $6 trillion by the end of this year, while the expected GDP is around $3.4 trillion. At the same time, Trump does not have Senate approval to take out a new loan to pay off this obligation, at least not with the current interest rate of 4.25–4.5%.
Meanwhile, the FED has been fairly consistent in pursuing its inflation targets, which are slightly above the target 2%, and the unemployment rate recently stood at 4%, which represents an excellent balance. However since the unemployment rate inevitably begins to rise sooner or later, there is a need to stimulate the economy by lowering interest rates, and this is what we see when the unemployment rate has slightly increased to 4.25%. This could be an ideal moment for lowering rates, but not yet urgent.
If the markets crash and the unemployment rate rises, the FED will be forced to accelerate rate cuts, which would be much more convenient for taking out a loan to pay off the U.S. national debt obligations. Now look at what is happening today. Is this clearly Trump’s true plan? Of course not. Is this situation particularly convenient in this context? Seems like.
Conclusion
And for now, there are no reasons to assume that the situation will improve drastically unless the entire tariff story is canceled. However, there is little hope for that, at least in the coming days, as such economic losses logically suggest that political points are being scored. However, this is not happening either among voters or within his own administration. On the contrary, we have seen the first disagreements within Donald Trump’s team.
Where this is all headed and how it will develop remains an open question. We will be watching very closely and exercising extreme caution during these moments. Be aware, and always assess the situation comprehensively, diversify risks, and adapt your strategy to daily changes.
