Market Rally Turns to Head Fake as China Tariff Reprisal Looms
China’s expected retaliation and these other known hurdles keep us on the sidelines.
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We are seeing the market’s morning rebound fade as it becomes clear the Trump reciprocal tariffs are poised to go into effect early on Wednesday morning.
One of our concerns has been a market head fake and that appears to be what we are seeing today. As we discussed in today’s video, given White House comments that trade negotiations could extend into June, we’re not surprised. That means that, as of now, after midnight Trump is planning to proceed with implementing tariffs that would amount to 104% on many Chinese goods. We’ve already heard from China that it plans reprisal tariffs and with Trump sharing he would impose tariffs on China even further in response.
A spokesperson for China’s commerce ministry warned against Trump’s step, saying Beijing would “resolutely take countermeasures to safeguard its own rights and interests. If the U.S. insists on going its own way, China will fight to the end.”
Other reports indicate that Washington and Beijing have had no serious communication on the trade and tariff issue, and U.S. trade representative Jamieson Greer said Beijing had not signaled any willingness to engage in trade talks.
During Trump’s first administration, China allowed its currency to devalue to offset the impact of tariffs, and we are seeing signs that it could revisit that playbook.
With a potential trade war in the offing, and the market’s skittish mood, aside from our pickup of Marvell MRVL shares on Tuesday morning, we’re staying on the sidelines when it comes to our current shopping list. Still to come are the other hurdles we’ve discussed, namely the European Union’s Trump tariff response and the start of the March quarter earnings season.
While the market’s mood could be swept up in headlines of the day, we’ll be mindful of the events ahead of us and how they could influence the conversation we shared with you on Monday about the S&P 500, that basket’s earnings and how the market values it.
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At the time of publication, TheStreet Pro Portfolio was long MRVL.
