US stocks mixed in volatile trading as trade war escalates
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(NEW YORK) –U.S. stocks were mixed at the open of trading on Wednesday, extending days-long turmoil in markets as tit-for-tat tariffs between the U.S. and China heightened the risk of a global trade war and worsened fears of a recession.
The Dow Jones Industrial Average opened down 315 points, or 0.8%, while the S&P 500 fell 0.4%.
The tech-heavy Nasdaq ticked up 0.03%.
Meanwhile, a selloff hit U.S. Treasury markets on Wednesday, sending bond yields higher and raising concern about a typical safe-haven asset during moments of instability for stocks.
President Donald Trump’s latest batch of levies on China increased the cumulative rate of tariffs on Chinese goods to 104% — a move met with retaliatory tariffs in Beijing that raised tariffs on U.S. goods to 84%.
The latest U.S. tariffs came into force with key Asian markets already open. In Japan, the Nikkei index dropped more than 5% in response, while the broader TOPIX index slipped 4.6%. The Nikkei closed down 3.93% and the TOPIX down 3.4%.
Stocks in Taiwan fell more than 5.7%, Singapore’s STI index slipped 2.4%, South Korea’s KOSPI index lost 1.8%, Australia’s S&P/ASX 200 lost 1.8% and India’s NIFTY 50 dropped 0.4%.
In China, Hong Kong’s Hang Sen index slipped 0.4%. Shanghai’s SSE Shanghai Composite Index — which has fewer international investors and is buoyed by the state-owned investors known as the “National Team” — posted gains of 1.1% despite the new tariffs. Shenzhen’s SE Composite rose 2.2%.
In Europe, key indices dropped on opening.
The British FTSE 100 dropped by 2.2%, Germany’s Dax index dropped 2.3%, France’s CAC 40 fell by 2.4% and Spain’s Ibex index was down 2%. The pan-European STOXX index was down 2.6%.
United States stocks closed lower on Tuesday, marking a major reversal from a rally that sent the S&P 500 and Nasdaq up more than 4% earlier in the day.
The Dow Jones Industrial Average closed down 320 points, or 0.8%, while the Nasdaq dropped 2.1%.
The S&P 500 fell 1.5%, putting the index on the brink of a bear market, a term that indicates a 20% drop from a previous peak.
The move lower on Tuesday resumed a selloff that stretches back to Trump’s tariff announcement last week. Since then, the S&P 500 and Nasdaq have each fallen more than 12%.
(WASHINGTON) — Federal Reserve Chair Jerome Powell stepped to the podium in August with a sunny forecast that defied the snow-capped mountains inscribed on curtains behind him.
The central bank planned to begin cutting rates, Powell announced, reversing a yearslong battle against pandemic-era inflation. “The time has come,” Powell told the audience at a conference in Jackson Hole, Wyoming, touting a steady cooldown of price increases.
Months later, economic uncertainty looms large, complicating the Fed’s approach while clouding the outlook for inflation and interest rates, some experts told ABC News.
President Donald Trump’s tariffs have roiled markets, stoked recession concerns and heightened worries about inflation. In short order, Trump has paused or reversed some tariffs, casting doubt over his plans and adding to the uncertainty, the experts added.
Policymakers, business leaders and everyday borrowers will turn their attention to the Fed on Wednesday for its latest interest rate decision, the first such move since days after Trump took office.
“The Fed is in a tough position,” Wendy Edelberg, director of the Hamilton Project and senior fellow in economic studies at the left-leaning Brookings Institution, told ABC News.
“We have all of the potential negative effects of tariffs, but we also have extraordinary uncertainty,” Edelberg added.
The Trump administration earlier this month slapped 25% tariffs on goods from Mexico and Canada, though the White House soon imposed a one-month delay for some tariffs. A fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China a month prior.
Tariffs imposed on steel and aluminum last week triggered retaliatory tariffs from Canada and the European Union, adding to countermeasures already initiated by China.
By some key measures, the economy remains in solid shape. A recent jobs report showed solid hiring last month and a historically low unemployment rate. Inflation stands well below a peak attained in 2022, though price increases register nearly a percentage point higher than the Fed’s goal of 2%.
However, experts said, tariffs may threaten both parts of the Fed’s mission: controlling inflation and maximizing employment.
Economists widely expect tariffs to increase inflation, since exporters typically pass along a share of the tax to consumers in the form of price hikes.
Consumers expect the inflation rate to rise from 2.8% to 4.9% over the next year, according to University of Michigan survey results released last week. The measure marked a significant jump in year-ahead inflation expectations compared to findings in February.
“There will be a price impact,” Yeva Nersisyan, a professor of economics at Franklin & Marshall College, told ABC News.
Tariffs could also threaten economic growth and employment since duties slapped on imports risk increasing input costs for domestic businesses that rely on raw materials from abroad, some experts told ABC News. Retaliatory tariffs may crimp exporting businesses since the taxes make U.S.-made products less competitive in foreign markets, they added.
Goldman Sachs earlier this month hiked its odds of a recession over the next year from 15% to 20%. Moody’s Analytics pegged the chances of a recession at 35%.
“There’s a risk that the economy does roll over and fall into a recession,” William English, a professor of finance and former economist at the Federal Reserve, told ABC News.
“The Fed probably sees an upside risk to inflation and a downside risk to employment,” English added. “They’ll have to balance those as they consider the path of policy.”
For its part, the Trump administration has largely declined to rule out the possibility of a recession. Speaking at the White House last week, Trump said a “little disturbance” may prove necessary to rejuvenate domestic production and reestablish well-paying manufacturing jobs.
The thorny economic outlook presents potential difficulty for the Fed, experts said.
If the central raises rates as a means of protecting against possible tariff-induced inflation, the Fed risks stifling borrowing and slowing the economy. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential recession, it threatens to boost spending and drive up inflation.
“If we were in an environment where inflation were to rise and rise consistently at the same time growth is slowing and unemployment is rising, that’s a real challenge for the Fed,” Claudia Sahm, chief economist at New Century Advisors and a former Fed official, told ABC News.
For now, the main quandary before the Fed stems from the wide range of possible outcomes, the experts said. Uncertainty, they said, will likely prompt the central bank to await further clarity.
Investors overwhelmingly expect the central bank to leave rates unchanged on Wednesday, according to the CME FedWatch Tool, a measure of market sentiment.
“For now, the Fed probably sees waiting as the best approach,” Nersisyan said.
(NEW YORK) — China issued a warning on Wednesday night that it stands ready for any “type of war” with the United States in the aftermath of tariffs imposed hours earlier by the Trump administration.
A spokesperson for the Chinese foreign ministry said the tariffs would not lead to a resolution of U.S. concerns about fentanyl originating in China.
“If the U.S. truly wants to solve the fentanyl issue, then the right thing to do is to consult with China on the basis of equality, mutual respect and mutual benefit to address each other’s concerns,” Chinese spokesperson Lin Jian said at a press conference late Tuesday.
“If the U.S. has other agenda in mind and if war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” Jian added.
The remarks came soon after the Trump administration imposed 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
Within minutes of the new U.S. tariffs taking effect, China unveiled on Tuesday its initial response by placing additional 10% to 15% tariffs on imported U.S. goods, like chicken, wheat, soybeans and beef.
Those duties will be on top of similar tariffs imposed back during the first Trump administration’s trade war in 2018. Some of those tariffs are already at 25%, though Beijing issued some waivers as a result of the 2020 “phase one” trade deal.
The new Chinese tariffs are set to come into effect for goods shipped out next Monday, March 10.
In a series of social media posts last month, Trump said he would place tariffs on Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the U.S.
During an address to a joint session of Congress on Tuesday night, Trump also sharply criticized tariffs imposed by the Chinese government on U.S. goods.
“President Trump continues to demonstrate his commitment to ensuring U.S. trade policy serves the national interest,” the White House said in a statement on Tuesday.
Commerce Secretary Howard Lutnick said on Tuesday afternoon that Trump may soon offer Canada and Mexico a pathway to relief from tariffs placed on some goods covered by North America’s free trade agreement.
Lutnick did not mention a potential compromise with China.
(NEW YORK) — President Donald Trump’s tariffs sent stocks tumbling in recent weeks, but the uncertainty helped propel a different asset viewed as a safe haven: gold.
The price of gold topped $3,000 per ounce for the first time ever last week, and the precious metal continued to hover around that mark in early trading on Monday.
Gold prices have soared 12% so far this year, while the S&P 500 has plummeted nearly 7%. Over that period, the Dow Jones Industrial Average has dropped 2% and the tech-heavy Nasdaq has tumbled 8.5%.
The rush toward gold makes financial sense, experts said. The asset offers investors a hedge against uncertain stock performance, since gold prices often display a degree of independence from movements in equities markets.
However, gold prices carry volatility of their own, some experts added, especially when buyers enter the market at a high point, risking losses instead of providing a security blanket. “Investors need to be careful,” Campbell Harvey, a professor at Duke’s Fuqua School of Business who studies commodity prices, told ABC News.
“At a time of heightened uncertainty, people look toward a safe haven – and gold is a perceived safe haven. But most people don’t realize that gold is volatile,” Harvey added.
The run-up in gold prices comes amid a market slump set off by an escalating global trade war.
Last week, the S&P 500 closed down more than 10% since its high in February, meaning the decline officially qualified as a market correction. It marked the index’s first correction since October 2023. At the same time, the Dow suffered its worst one-week drop-off since 2023.
“Right now, it’s a very anxious marketplace,” Jim Wyckoff, senior market analyst at Kitco Metals, told ABC News. “That’s been a detriment for stock-market bulls and a boom for gold-market bulls.”
The flight to gold in moments of market crisis draws on decades of evidence, according to an analysis co-authored by Harvey in 2020. The price of gold moved higher during seven of the last nine major stock market selloffs stretching back to the late 1980s, researchers found.
“It’s a good track record, but it’s not a sure thing,” Harvey said. “Even though it went up seven out of nine of these drawdown periods, that doesn’t mean it will be seven out of nine in the next nine drawdowns.”
Last week, Paris-based financial firm BNP Paribas raised its forecast for gold prices, predicting the precious metal would exceed $3,100 an ounce. The company attributed the rosy outlook to economic uncertainty incited by Trump, but it warned such gains would likely fizzle out by the second half of this year.
“The gold market will price in or normalize Trump-driven trade risks, as it typically does with geopolitical risk,” BNP Paribas said in a report shared with ABC News. “Thus, if there is no ongoing escalation in trade tensions, gold prices will, in our view, struggle to maintain further upside momentum.”
Some experts who spoke to ABC News acknowledged the current price boom may eventually lose steam, but they still encouraged investors to add the precious metal to their portfolios as a means of offsetting the heightened risk of stocks.
“Gold offers diversification,” Trevor Yates, an analyst at investment firm Global X, told ABC News. “We see gold warranting a place in the portfolio.”
Investors who add gold for the sake of diversifying their portfolio, however, may want to add other assets alongside it, such as Treasury bonds or real estate, Harvey said.
“There are other safe assets besides gold,” Harvey said. “Don’t put all of your eggs in one basket.”
