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Donald Trump rattles global investors once again on Tuesday, moving forward with aggressive tariff plans on America’s biggest trading partner, even as he promotes potential deals with American allies.
The stock market fell sharply as Trump failed to ease traders’ nerves. Hours before he smashed the country from the EU to China with a sudden new taxation, he leaned the world into a full-scale trade war.
White House officials, including Treasury Secretary Scott Bescent, had asked him to speak on Tuesday about possible trade negotiations with South Korea, Japan and other countries. This is a message that gave Trump hope that he could ease pressure from his billionaire allies, trading partners and Republicans.
However, any relief was short-lived as it became clear that Trump was leading a new era of global trade disputes and moving forward with his plans to unload tariff arms on his trading partners.
The new blitz in Trump’s tariffs from Wednesday includes additional taxation in China despite warnings that Beijing will “fight to the end” in a rapidly developing trade dispute.
According to White House press secretary Caroline Leavitt, the 50% tariff on China, the world’s second largest economy, will “come into effect at 12:01am” on Wednesday.
Peter Chill, Head of Macro Strategy at Academy Securities, said: “But we’ve beaten China’s increased surcharges. We’ve slowly lost this optimism that this is a negotiation tactic. That’s why the deal is so unstable today.”
The Benchmark S&P 500 Index rose by 4.1% early in the trading session, but ended with a loss of 1.6% after Leavitt’s remarks. Apple, which is heavily exposed to China through its supply chain, fell more than 8% this week alone, as investors worry about margins.
Additionally, the US Treasury $2.9 billion has been exposed to rising sales pressure over the past two days, with long-term borrowing costs rising as volatility encourages hedge funds to sharply reduce risk.
“The market price action was dramatic,” Wall Street Bank’s Goldman Sachs said in a note to its client, adding that “the estimate of a “shock” on market views using a joint US stock-bond movement is consistent with a major downgrade to US growth views.”
Additional taxes on China mean that exports to the US face an obligation of 104% or more. This is at a level considered a provocation by Beijing, and has already retaliated with a 34% tax on US imports, moving down the currency.
In addition to the new China duties, the US will also impose taxes on almost all other imports from Wednesday. This is the “mutual” tariffs Trump announced last week on his “liberation day.”
Since then, the announcement has twitched financial markets, wiped market value down to 6.2 tons from the S&P, causing warnings of spiral inflation in the US and slowing the global economy.
The oil market has also plummeted in response to expectations of a sharp slowdown in global trade, with US benchmark West Texas mid-range trade at under $60 on Tuesday, with drillers at levels that hamper Trump’s ambitions to increase US gross supply.
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His US president’s resolve to track ultra-protectionist tariff policies has sparked a fierce backlash from Wall Street, business leaders and Republican lawmakers.
The looming trade war and economic turmoil began to divide within Trump’s own circle. Bescent explained on Monday the plan to begin talks with Japan over the new trade agreement, but Trump’s trade emperor Peter Navarro wrote in the financial era that the president’s position was “not negotiations.”
On Tuesday, tech billionaire and Trump adviser Elon Musk attacked Navarro as “moron” and “more ridiculous than a brick bag” after Navarro suggested that his opposition to the Tesla boss’s tariffs was selfish.
