US-China trade tensions push stock markets down while gold hits record highs. New tariffs and chip export restrictions increase economic uncertainty.
Global Shares Fall as US-China Trade War Escalates
In a turbulent day for global markets, stock prices plummeted on Wednesday due to escalating trade tensions between the United States and China. The U.S. government’s new restrictions on chip sales to China, combined with the ongoing uncertainty around tariffs, weighed heavily on tech stocks, sending markets into a tailspin. Meanwhile, gold prices surged to record highs as investors sought refuge amid rising volatility.
The U.S. issued new export licensing requirements for artificial intelligence (AI) chips, specifically targeting Nvidia’s H20 and AMD’s MI308 chips. Nvidia, one of the leading tech companies in the U.S., warned that these new restrictions could cost the company up to $5.5 billion in lost revenue. Following this announcement, Nvidia’s stock price dropped nearly 7%, reflecting the market’s concerns about the impact of these measures.
The global stock market, represented by the MSCI All Country World Index, saw a sharp decline of approximately 1.5%. In the U.S., the situation was no better, with major indices suffering significant losses. The Dow Jones Industrial Average fell by 1.7%, while the S&P 500 dropped 2.2%. The Nasdaq Composite, which is heavily weighted toward technology stocks, saw the most significant drop, losing 3.1%.
Paul Christopher, a strategist with Wells Fargo Investment Institute, commented that capital markets remain caught between conflicting forces: the announcement of new tariffs and the potential for tariff negotiations or suspensions. This uncertainty is creating volatility and challenging investors who are trying to navigate the shifting landscape of global trade policies.
Federal Reserve’s Response to Market Volatility
Federal Reserve Chairman Jerome Powell addressed the current economic uncertainty on Wednesday, stating that the central bank would wait for more data on the economy before deciding on any changes to interest rates. Powell described the recent market fluctuations as a natural reaction to the Trump administration’s dramatic shifts in tariff policy.
In a statement, Jamie Cox, managing partner at Harris Financial Group, noted that Powell’s approach is in line with that of most market participants, who are taking a wait-and-see stance. “The Federal Reserve won’t act unless and until either the labor market turns or there is a systemic risk, such as a breakdown in the payment system,” Cox said.
Despite concerns over broader economic trends, the U.S. saw a surge in retail sales in March, particularly in the automotive sector, as households rushed to purchase vehicles ahead of anticipated tariffs. However, fears about the long-term economic outlook are starting to impact discretionary spending, with consumers hesitant to make non-essential purchases.
China Responds with Retaliation
In response to the escalating trade tensions, China has continued to take a hard stance. The Chinese government reportedly ordered airlines to suspend deliveries of Boeing aircraft, signaling its determination to counter U.S. trade policies. Additionally, President Donald Trump ordered an investigation into the potential imposition of new tariffs on critical mineral imports, further heightening concerns about the broader implications of the trade war.
European and Asian Markets Follow Suit
European stocks also experienced losses, with the STOXX 600 index falling 0.2%. The decline was driven by a drop in tech sector stocks, which mirrored the struggles of the U.S. and Asian markets.
In Asia, the MSCI Asia-Pacific index (excluding Japan) dropped 0.8%, marking the end of a four-day winning streak. However, Chinese blue-chip stocks managed to rise by 0.3%, driven by better-than-expected GDP data released prior to the tariff increases in April. On the other hand, Hong Kong’s Hang Seng Index fell by 1.9%, underscoring the region’s vulnerability to the ongoing trade conflict.
Aneeka Gupta, an economist and strategist at WisdomTree, commented that despite some positive economic data, the broader focus in global markets remains squarely on tariffs and their potential impact on the global economy. As the situation continues to develop, market participants are closely monitoring any new announcements or policy changes that could further exacerbate the tensions between the U.S. and China.
Source : Latest Headlines
