TLDR
- China is open to trade talks with the US but wants the Trump administration to show more respect
- ASML reported weak orders and uncertainty about US tariff impacts
- Nvidia can’t sell its H20 chip to China, deepening the US-China tech rift
- US Treasury Secretary Scott Bessent is optimistic about tariff clarity in next 90 days
- Stock market dropped 19% over six weeks but has since bounced 9% following tariff pause
The ongoing trade tensions between the United States and China continue to evolve, with recent developments suggesting both opportunities for dialogue and deepening economic impacts. China has signaled willingness to engage in trade talks with the Trump administration, but only if the US demonstrates more “respect” and names a specific point person for negotiations.
The escalating trade war has already begun affecting major technology companies. ASML, a key semiconductor equipment manufacturer, alarmed investors on Wednesday by reporting weaker-than-expected orders. The company acknowledged it cannot yet fully assess the impact of new US tariffs on its business operations.
In a related development, Nvidia revealed it has been barred from selling its H20 chip to China. This restriction represents another step in the widening technological divide between the two economic powers. These incidents highlight how the trade conflict is already causing disruptions for global firms.
Economic Impacts Emerging
US Treasury Secretary Scott Bessent expressed optimism about achieving clarity on tariffs and making progress on key trade deals within the next 90 days. Speaking to Yahoo Finance, Bessent emphasized that the administration is working with 14 other large trading partners apart from China.
“Let’s set aside China. There are 15 large trading partners. We set aside China,” Bessent stated. “There are 14, and we’re in rapid motion and setting up a process for the 14 largest trading partners.”
The Trump administration has implemented a broad 90-day pause on steep “Liberation Day” tariffs. This temporary measure aims to provide time for negotiators to work out new agreements. However, tariffs specifically targeting China have increased dramatically.
The trade conflict has escalated to new heights, with China raising duties on US imports to 125% from 84%. Meanwhile, US tariffs on Chinese imports have jumped to 145%. These mutual increases reflect the intensifying commercial hostilities between the world’s two largest economies.
Market Reactions and Future Outlook
The stock market has experienced substantial volatility in response to the tariff situation. The S&P 500 dropped 19% over six weeks, falling from its record close of 6144 on February 19 to 4982 on April 8. Since then, it has rebounded 9% to around 5400, following the White House’s announcement of the 90-day tariff pause.
Despite this recovery, market uncertainty remains high. The CBOE Volatility Index (VIX) stands just below 30, indicating that investors see a wide range of possible stock prices ahead. This contrasts with periods of economic stability when the VIX typically sits in the teens or low double digits.
Economic indicators suggest growing concern among businesses. The U.S. NFIB Small Business Optimism Index has fallen for three consecutive months, reaching its lowest level this year. This decline suggests businesses may reduce investment and hiring, potentially pushing the economy toward a recession.
Major financial institutions have begun reporting first-quarter earnings, with banks like JPMorgan Chase, Wells Fargo, and Goldman Sachs beating estimates. However, these reports don’t yet reflect potential tariff impacts, and many companies have avoided providing second-quarter guidance due to uncertainty.
JPMorgan CEO Jamie Dimon captured the prevailing sentiment: “The economy is facing considerable turbulence. We hope for the best but prepare the firm for a wide range of scenarios.”
The full extent of profit damage may not become clear until next year. Morgan Stanley’s Mike Wilson estimates that the S&P 500’s aggregate earnings per share could land 8% below current expectations, creating vulnerability to another market decline.
For now, the Trump administration continues its dual approach of applying pressure while seeking negotiation opportunities. The Commerce Department has begun an investigation into semiconductor and drug imports, potentially paving the way for additional tariffs in these sectors.
Meanwhile, the baseline 10% tariff that took effect on April 5 remains in place for all affected US imports, creating an ongoing economic headwind as both sides determine their next moves in this expanding trade conflict.
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