NEW YORK (Reuters) -U.S. President Donald Trump on Friday said he was increasing tariffs on Chinese exports to the U.S. to 100% and imposing export controls on “any and all critical software” in a reprisal to recently announced export limits by China on rare earth minerals critical to tech and other manufacturing.
Earlier, he said there was no reason to meet with President Xi JinPing in two weeks as planned, triggering a sell-off in the dollar, U.S. stocks, and a flight to safe-havens like Treasuries.
China this week has tightened restrictions on exports of key rare earth materials and, separately, on Friday said it would impose extra port fees on U.S. ships from October 14.
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“Here we go again. Trade negotiation via social media can be very disruptive to markets, but a lot can change quickly. By setting a November 1st implementation date for tariffs, that leaves enough room to have people actually talk with each other about the issues instead of just lobbing press statements back and forth. Downside risks to growth and upside risks to inflation are now higher than they were just 12 hours ago, but those risks don’t have to become reality.”
CLAYTON TRIICK, HEAD OF PORTFOLIO MANAGEMENT FOR PUBLIC STRATEGIES AT ANGEL OAK CAPITAL, ATLANTA:
“I think it’s a little early on the bubble side. Volatility has been really low with the government shut down and no data, and I feel like vol should be higher. It needed a catalyst, and so this was the catalyst to repricing here.”
“You still have labor concerns, inflation concerns, and the idea that we’ve had no vol and just automatic buying of equities last week, I’ve actually thought when we get clarity of the government maybe reopening in the U.S. today, it may actually cause a sell-off because now you have data coming to the market and everyone waking up again. But we got it early. We got the Trump news on China.
“So, I view that this vol needed to happen. I wouldn’t say it’s the start of the beginning of a much larger sell-off. Because I still feel that there’s so much cash on the sidelines to buy the dip that I don’t think it would sustain that much lower. But I wouldn’t be surprised if equities traded in a sideways range for a while here. I don’t see the market ripping higher right now.”
ANSHUL SHARMA, CHIEF INVESTMENT OFFICER, SAVVY WEALTH, NEW YORK:
“Today’s sharp sell-off reflects renewed fears that the U.S. is escalating trade tensions with China, particularly the threat of a large hike in tariffs and the cancellation of the meeting with President Xi. These moves inject real risk into global supply chains, corporate margins, and investor sentiment.”
“We think this is less about valuations and more about sentiment. Fundamentally, corporate earnings and balance sheets remain healthy, but when policy uncertainty spikes, as it did with today’s tariff headlines, investors tend to de-risk quickly. In our view, this is a sentiment-driven pullback within an otherwise resilient market backdrop.”
“That said, if trade tensions persist and start to filter into earnings guidance or capital-spending plans, we think the market could see a more drawn-out adjustment. It’s unlikely to ‘pop’ a bubble overnight, but it may reset expectations and reintroduce volatility around policy risk. On the flip side, any sign of de-escalation or renewed dialogue could just as quickly revive risk appetite.
“On balance, we think this episode serves as a reminder that policy shifts can still rattle markets, much like we saw in late March and early April, even when underlying fundamentals remain sound.”
MALCOLM POLLEY, DIRECTOR STRATEGIC MARKET ANALYSIS, STRATOS WEALTH MANAGEMENT, SEWICKLEY, PENNSYLVANIA:
“I think it’s weird that the market is still getting all bent out of shape over tariffs, when there is a lawsuit that the Supreme Court will hear next month about the constitutionality of all these. It would be beyond shocking to me if Trump wins. If that’s true, then all these tariff issues become moot, because Congress would have to approve them. So it’s surprising to me that this is the mountain that the market is choosing to die on. There have been a lot of murmurings about how expensive the markets have become, though, and there’s a feeling we should probably dial back risk as we probably were bound to have some kind of correction. Some of this is probably because it’s Friday, and banks aren’t open on Monday. There are people that just don’t want to own things that long because absolutely anything could happen over the weekend.”
JAMES ST. AUBIN, CHIEF INVESTMENT OFFICER, OCEAN PARK ASSET MANAGEMENT, SANTA MONICA, CALIFORNIA:
“This is just an escalation of the trade war that has been somewhat subdued for the last several months. The market hasn’t been putting a lot of worry into this trade war as things have settled down after Liberation Day. The main players here – China and the U.S. – were working it out if you will. But that seems to be in jeopardy in terms of where China and the U.S. may find reasons to re-engage and re-escalate this conflict. It certainly is concerning for markets that have been clearly pricing in very little risk and very little concern over whether it be the trade war or any other potential government shut down things like that for something to go wrong. Here, we have some potential for an escalation in a very important trade relationship and that rightfully creates a little fear in the market, which we haven’t seen much of since Liberation Day.”
JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA:”All the smart money is scooping up chip stocks on weakness today. Markets were rife for a little sell off, given such outsized gains since April, but, as with tariff month, it’s yet another buying opportunity. The bull market is intact.”
TIM HOLLAND, CHIEF INVESTMENT OFFICER, ORION, OMAHA:
“After months of more good news than bad and more certainty than uncertainty around trade – think the UK, EU and Japan deals and ongoing negotiations with China – today’s developments are a reminder that trade is not fully solved for, and macro and geo-political uncertainty persists. We are hopeful that US/China negotiations will continue and recent moves by both sides will prove to be more about tactics and positioning than not.”
“We don’t think US stocks are in a bubble. That said, stocks have done quite well year to date and trade at elevated multiples. While we are not rooting for a meaningful pullback, any drop should put equities in a more constructive position from a valuation and a sentiment point of view. We would note that it seems to us the Administration has often gotten most aggressive on the trade front after the market has had a strong run, which it has had these past few months.”
MICHAEL ROSEN, CHIEF INVESTMENT OFFICER, ANGELES INVESTMENTS, SANTA MONICA, CALIFORNIA:
“The threat of more tariffs is a reminder that market volatility will remain elevated while Trump is in the White House.”
“The actual tariff rate has been significantly below what was feared, and companies are adjusting to this new era in trade policy. We should expect to see markets back on track after this momentary bout of volatility.”
TOM BRUNI, HEAD OF MARKETS AND RETAIL INVESTOR INSIGHTS, STOCKTWITS, NEW YORK”
“Trump’s actions against China this morning were the excuse the market needed to begin correcting. Over the last week or so, we’ve seen momentum at the index level wane, with bitcoin, the S&P 500, and many leading stocks making marginally new all-time highs before falling back into their ranges. This, combined with the ‘euphoric’ feeling of almost any risk asset investors bought immediately going up, showed that sentiment was due for a reset; the market just needed a catalyst to begin that process.”
MATTHEW MISKIN, CO-CHIEF INVESTMENT STRATEGIST, MANULIFE JOHN HANCOCK INVESTMENTS, BOSTON:
“The markets had become numb to geopolitical uncertainty and the trade war, but… it is still lingering out there as a risk.”
“The dollar is weaker, which does suggest there’s not a flight to safety there.”
“The markets were overbought and really momentum heavy and they were due for some volatility. Is this a significant trigger? It may not be, just because we’ve already been going through this trade war for months now.”
“At the end of the day, it’s going to come back to the economy. It’s going to come back to corporate profits and earnings season is right around the corner…. It might be a healthy setback here after such a big run.”
“Earnings season actually is going to be in focus and we think that’s going to be what the markets are going to be paying more attention to next week.”
“Valuations are stretched nearly across the board… The thing that has to come through is earnings. If earnings growth does not deliver, it is going to be very hard for this market to justify its current levels.”
GENE GOLDMAN, CHIEF INVESTMENT OFFICER AT CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CA:
“The news is a surprise because just in two weeks President Trump was going to meet Xi to talk about trade and markets were very optimistic.”
“The markets were fine this morning but with Trump saying that he’s going to massively increase tariffs on China and that he’s also not going to do the meeting in Korea that was supposed to take place with Xi in two weeks, this makes the markets jittery. It adds an additional risk.”
“With equities at high valuations this sell-off, is a sign of jitters. Everything is priced for perfection so the uncertainty increases market jitters. All of this adds uncertainty to economic growth. That’s why we’re seeing treasury yields fall. Oil is selling off too. Anything tied to the economy is weakening.”
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON:
“It sends a message of negativity. What markets, for the most part, and investors need is a little bit clearer guidance, especially when trying to figure out if the Federal Reserve is going to deliver what they want, which is 50 basis points slashed off the interest rate for the remainder of the year.”
“It brings, once again, to the table and to the spotlight that the United States is acting unilaterally to try to align trade and to try to get countries to align with trade. So ultimately, it does create a lot of negativity for the U.S. economy. It creates doubt about, where is this all going? What is the purpose? Is China really going to have to be very retaliatory moving forward in order to get the United States to negotiate better? So it creates a lot of doubt.”
CHRIS SCICLUNA, HEAD OF RESEARCH, DAIWA CAPITAL MARKETS, LONDON:
“It’s difficult to know how to respond to this (the Trump comments). The temptation, given what’s happened since the start of the year and the resilience of markets, is to fade these announcements and take this with a pinch of salt what he’s saying. We’ll have to see what the substance is.”
STEVE SOSNICK, CHIEF MARKET ANALYST, INTERACTIVE BROKERS, CONNECTICUT:
“The president’s comments are not are obviously not helpful for the market. We finally got through the worst of the tariff concerns and now we find ourselves once again faced with another round of them and the tone of his comments was certainly quite aggressive – massive tariffs being threatened and no reason to talk to him (Xi). So this is definitely going in the wrong direction about U.S. China trade relations. It’s definitely not a market friendly move and considering how quickly the market is selling off on this.”
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, CONNECTICUT:
“He’s (Trump’s) caught the market off guard again and thrown more question marks into a market that is being questioned about a very high degree of enthusiasm and being sort of scrutinized for having too much fluff built into it. Then Trump comes out with this surprise announcement, so you have a market that hit an air pocket and is selling off a little bit. When you reacted to it in the past, it’s come back and burned you. Do you sell out of this market because of this? It’s a giant question mark. It just creates more questions and volatility in the market.”
MIKE BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:
“It’s a bolt from the blue from Trump and after the rare earth news earlier … the timing is a big surprise. I would say as always with Trump and I think the market has learned this now, it’s difficult to determine what is the bluster and rhetoric and what he might follow through on.
The key thing market participants will be focused on as we move into the weekend and next week, is: are we now looking at having to tear up the assumptions we did have that trade was a done deal and now look at a re-escalation of tensions between the two.
If we are, and talks are in jeopardy, you are looking at a fairly chunky leg lower in risk in the days and weeks ahead.”
(Compiled by the Global Finance & Markets Breaking News team)
