The U.S. stock market is shaking in another twitchy day of trading after most other markets tumbled Wednesday as
President Donald Trump’s trade war keeps escalating.
The S&P 500 was down 0.7 per cent in midday trading after quivering at the start of trading. The index at the centre of many 401(k) retirement accounts swung from an initial loss of 0.5 per cent to a gain of 1.4 per cent and back down, all in less than an hour after trading opened.
The Dow Jones Industrial Average was down 263 points, or 0.7 per cent, as of 11 a.m. ET and the Nasdaq composite was 0.2 per cent higher.
The world’s second-largest economy would impose additional tariffs of 84 per cent on all U.S. goods as of Thursday, up from the 34 per cent previously announced, China’s Finance Ministry said.
Beijing said it was also launching an additional suit against the U.S. at the World Trade Organization and placed further restrictions on American companies’ trade with Chinese companies.
“If the U.S. insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the Ministry of Commerce wrote in a statement introducing its white paper on trade with the U.S.
In contrast to the rest of the world, Chinese markets saw small gains after the announcement of new tariffs on the U.S. Hong Kong’s Hang Seng rose 0.7 per cent, while the Shanghai Composite index closed 1.3 per cent higher.
Huge swings have become routine for financial markets worldwide recently, not just day to day but hour to hour, as
investors struggle to game out what Trump’s trade war will do to the economy.
U.S. President Donald Trump’s sweeping tariffs — including a rate of 104 per cent on China — are in effect, rattling global markets and sparking questions about what the seismic trade shifts will mean for Canada and the world.
Oil prices tumbled, with a barrel of benchmark U.S. crude falling below $57 from more than $71 a week ago. That’s an
indication of fears about a weakening global economy burning less fuel, and could signal a recession ahead.
The CBOE Volatility index — seen as Wall Street’s “fear gauge” — was hovering near its highest level since August.
Such aggressive brinkmanship between the world’s two largest economies is raising fears that tariffs will stick around for a while, which economists and investors expect would create a recession.
“I do think that this is a game of ‘chicken’ in the sense that both sides [China and the U.S.] are upping the barriers,” said Peter Andersen, founder of Andersen Capital Management.
“What we’re seeing now is a complete correlation between any news related to tariffs and the stock market reactions.”
The European Union on Wednesday also approved tariffs affecting $23 billion in U.S. goods in its own retaliatory move.
Some hope still remains on Wall Street that Trump could lower his tariffs following negotiations with other countries, which is what’s helping to send stock prices upward at times.
“BE COOL!” Trump said on his Truth Social platform shortly after trading began on Wall Street. “Everything is going to work out well. The USA will be bigger and better than ever before!”
Since Trump unveiled his tariffs last Wednesday, the S&P 500 has shed more than $5.83 trillion US in market value and will confirm a bear market if it closes more than 20 per cent below its record high. As of the last close, it was down 19 per cent from its peak.
Some of Wednesday’s strongest action was in the U.S. bond market, where Treasury yields rose sharply again. The yield on the 10-year Treasury climbed to 4.38 per cent from 4.26 per cent late Tuesday and from just 4.01 per cent at the end of last week. It approached 4.50 per cent earlier in the morning. That’s a huge move for the bond market and could be an indication of stress.
The moves are notable because U.S. Treasury bonds have historically been seen as some of the safest possible investments, and their yields have tended to fall — not rise — during scary times for the market.
The higher yields on Treasury bonds add pressure on the stock market and will likely push up rates for mortgages and other loans for U.S. households.
George Saravelos, the Deutsche Bank head of foreign exchange research, said the move away from bonds could be a sign of investors not wanting to hold U.S. assets in general.
“We are witnessing a simultaneous collapse in the price of all U.S. assets including equities, the dollar versus alternative reserve FX and the bond market. We are entering uncharted territory in the global financial system,” he said.
Markets in Europe also extended their losses, with Germany’s DAX sliding 4.1 per cent. In Paris, the CAC 40 declined 3.9 per cent and Britain’s FTSE 100 gave up 3.8 per cent.
Elsewhere, markets remained gloomy. Japan’s Nikkei 225 closed 3.9 per cent lower, at 31,714.03 and Prime Minister Shigeru Ishiba convened a meeting of top financial ministers to reiterate his call for them to do what they can to mitigate the damage from tariffs to Japanese automakers and other manufacturers.
Taiwan led the losses in Asia, as its Taiex plunged 5.8 per cent.
