Macro Events & News
The Trump administration’s tariff strategy is unraveling as China continues to prove it won’t be strong-armed. This past week ended with the U.S. imposing 145% tariffs on Chinese goods, while China countered with 125% on U.S. imports. Adding fuel to the fire, China canceled billions in agricultural and crude oil orders from the U.S., signaling its willingness to absorb short-term pain to push back against what it views as economic aggression.
From the start, the U.S. approach lacked coherence—there were no clearly defined objectives, and instead of isolating China, the administration opted to target virtually all trade partners. This has left the U.S. without global allies in this confrontation, a strategic miscalculation that now leaves the country exposed and economically vulnerable. Markets reflected this fragility, with heightened volatility, sustained equity losses, a selloff in bonds, and a rapidly depreciating dollar. Meanwhile, corporations are pulling back on investment and spending amid market cap erosion and uncertainty, while rising unemployment further fuels recession fears. Unlike traditional tariffs, which are usually temporary policy tools, the Trump administration’s unilateral approach suggests these could remain in place indefinitely—especially since they bypass Congressional oversight.
There were, however, a few bright spots. Inflation data showed moderation, with both the Consumer Price Index (CPI) and Producer Price Index (PPI) coming in cooler than expected. But as anticipated, this provided little relief to investors given the overshadowing trade war and policy instability. Banks also kicked off earnings season with strong reports—JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), and Wells Fargo (NYSE:WFC) all posted solid quarters and highlighted the underlying strength of the economy. Still, each emphasized that the escalating trade war is a major headwind that could meaningfully impact not just their financial performance, but broader economic health.
The 10-year Treasury yield surged to 4.49%, up sharply from 4.00% at the start of the week—reflecting rising investor concern and continued bond market volatility. Meanwhile, the VIX closed at 37.56, still elevated and signaling persistent fear in the market. Although down from intraday spikes into the 50s earlier in the week, the VIX averaged above 40—levels not seen since the COVID-19 crash and the global financial crisis—underscoring the deep unease gripping markets amid escalating trade tensions.
All the major indexes ended significantly higher for the week but not close to recovering the prior week’s losses: the Dow up 5%, the S&P 500 up 5.2%, and the Nasdaq up 6.7%.
