Market Struggles Continue as Trump Pushes to Restructure the Global Economic System
A full-blown trade war is erupting as China has responded with additional tariffs of 34%.
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Market participants greatly underestimated the economic goals of the Trump administration. Early this week, there was anticipation that Trump would impose increased tariffs and then quickly negotiate to reduce and equalize them. The belief was that this would be done relatively fast and not produce too much stock market disruption.
When tariffs were announced on Tuesday afternoon, investors started recognizing that Trump’s economic goals were much more ambitious than just equalizing tariffs. The goal was to reduce the trade imbalance by creating economic incentives and punishments to push businesses to operate in the U.S. Trump wants foreign manufacturers to move their factories to the U.S, and he will use aggressive tariffs to pressure them to do so.
Friday morning, China responded to Trump by announcing that it would add tariffs of 34% on U.S. goods as of April 10. In addition, it added 11 companies to its "unreliable" list and is placing restrictions on some rare earth-related items.
China’s move is the first response to the tariffs and signals a full-blown trade war is now in place. This response will likely embolden the European Union and others to issue aggressive responses.
After the worst performance in five years, the S&P 500 is down an additional 2.3% on the news Friday morning. Technology stocks are looking even worse. This collapse looks similar to what occurred during the Covid-19 pandemic. And there is still tremendous uncertainty as we await further responses from Europe, Canada, and others.
Technically, there is no support currently. There was no dip buying at all, and futures never bounced overnight. The China news has caused a sudden spike lower, and there is unlikely to be much interest in trying to catch this market that is acting like a falling safe.
My game plan is to stand aside and not even think about trying to time a bottom. I will not be a buyer until there are signs of support and potential upside follow-through.
Put on your trading goggles and adjust your seat belts. It is going to be a bumpy ride.
At the time of publication, Rev Shark had no positions in any securities mentioned.
