Market Slips on Trump Tariff Threats and Trade Uncertainty:
U.S. markets experienced significant turbulence after President Donald Trump
renewed his threats to impose severe tariffs on the European Union and Apple Inc.,
triggering a drop in stock indices and pushing the U.S. dollar to its lowest level since December 2023.
Contents
New Market Losses Amid Trump’s Tariff Escalation
The S&P 500 index continued its decline for the fourth consecutive day,
falling by 0.7% following Trump’s statements that he is “not seeking a deal”
with the European Union and will impose 50% tariffs starting June 1.
Markets had briefly rebounded after Treasury Secretary Scott Bessent
announced that the U.S. is close to securing “several major trade deals” in the next two weeks.
Apple led the losses among tech giants, dropping 3%.
United States Steel surged by 21% following Trump’s support for its acquisition
by Japanese firm Nippon Steel—a deal expected to add 70,000 jobs and inject $14 billion into the U.S. economy.
Asset Performance
10-year U.S. Treasury bonds held their gains, with yields at 4.51%,
Following Bessent’s remarks suggesting regulatory easing of capital requirements,
which could potentially lower bond yields.
Meanwhile, safe-haven assets such as the Japanese yen, Swiss franc, and gold rose sharply,
Gold has been climbing more than 5% over the past week.
The Bloomberg Dollar Spot Index fell by 0.8%,
reflecting growing concerns over escalating trade tensions.
The Stoxx Europe 600 index declined 0.9%,
with European auto stocks—vulnerable to U.S. tariffs—among the worst performers.
Confusing Tariff Policy and Strong Market Reactions
Trump stated on social media that the 25% tariff proposed on Apple
would also extend to other smartphone manufacturers, including Samsung.
As part of efforts to shift production back to the U.S.,
he justified the new threats by citing a lack of progress in EU talks, saying negotiations had “led nowhere.”
Many analysts saw the move as a market-disrupting surprise.
Recent weeks have been marked by optimism that Trump might soften his trade stance.
Louis Navellier of Navellier & Associates said,
“Volatility remains the market’s dominant feature,
” adding that “tariffs will remain a source of uncertainty until effective deals are reached.”
Neil Birrell of Premier Miton Investors commented,
“We thought it was safe to re-enter markets, but it was not.
Uncertainty persists due to Trump’s tariff strategy.”
Ankha Gupta, Head of Macroeconomic Research at WisdomTree,
noted that markets had hoped for a quiet period during the 90-day tariff suspension,
but the sudden escalation reignited tensions. “Extreme volatility will persist,” she warned.
Threat or Negotiation Tactic?
According to Capital Economics, Trump’s proposed 50% tariff on the EU may be a mere “negotiation tactic,”
Long-term rates are likely to settle closer to 10%.
Eric Theil of Comerica Wealth Management argued
that the EU might face less impact than emerging Asian markets,
which are more integral to global tech supply chains.
He added, “Despite the uncertainty,
we believe most companies are well-positioned to absorb temporary import cost spikes.”
Recession Risks and Fiscal Concerns
Trump’s erratic tariff policies have rattled market sentiment and raised fears
of a potential economic recession, particularly amid growing concerns over U.S. asset safety.
Jamie Dimon, CEO of JPMorgan Chase, warned against complacency in the face of inflation,
rising credit spreads, and geopolitical risks.
Adam Turnquist of LPL Financial noted that trade and fiscal deficit concerns may not be visible in equities,
especially after the strong April rebound, which is reflected in currency movements.
Against this backdrop, investors demand higher returns for holding long-term U.S. debt.
The 10-year bond premium has climbed to 1%,
its highest since 2014, indicating worries over future borrowing levels.
Solita Marcelli of UBS Global Wealth Management believes that if yields rise significantly,
the Federal Reserve or the Trump administration may intervene.
She emphasized that high-quality bonds remain a strong option for investors seeking stable income.
Market Slips on Trump Tariff Threats and Trade Uncertainty