Global markets face increased volatility as the U.S. government confirmed a cumulative tariff rate of 145% on imports from China. This announcement comes as tensions between the US and China boil over. It is no surprise that people are concerned about the long-term ramifications of this circumstance on international commerce. The White House revealed this detail to CNBC on Thursday, helping to paint a picture of the confusion and complexity currently permeating U.S.-China trade relations.
The new tariff rate is a killer 125% duty. There’s a new 20% duty specifically targeting the fentanyl crisis. The trade landscape has only gotten more complicated. The U.S. is currently aggressively pursuing non-tariff barriers and tariffs against countries that it perceives to have unfair trade practices. The new higher tariff rates extend the current “reciprocal” trade policy of the last administration of President Donald Trump. This policy seeks to punish their nations for what we deem unfair practices.
Given the growing tensions, the U.S. has choose to grant a temporary 90-day reprieve on some reciprocal tariffs. This temporary reprieve is set to expire again this coming July. This decision is consistent with President Trump’s announcement in late August. We interpret his goal to be reducing immediate pressures on select imports from all countries but with a continued focus on resolving chronic trade imbalances.
The market response to these developments has been nothing short of astounding. According to analysts, investors have become skittish, creating an entrenched risk-off sentiment. This sectoral shift has been large enough to push broad stock indices, including the Dow Jones Industrial Average and S&P 500, sharply lower. The uncertainty surrounding trade relations has adversely affected the cryptocurrency market, with notable declines in values for bitcoin and ether.
“While it’s no secret that BTC is still closely tied to the daily fluctuations of the market and overall sentiment, its ability to hang in in the face of this recent bloodbath has been impressive,” – Read Harvey
Combined with an escalating cumulative tariff rate that’s ratcheting up the pressure on this already fragile market, investors are growing nervous. The cloud of uncertainty has led to a sell-off in virtually every major Asia-Pacific market. Japan was hit hard, experiencing a sudden drop of over 5%. As traders react to these changing dynamics, many are left questioning how long the market can sustain itself amid such turbulence.
These tariffs are more than just bad news for immediate market reactions. They signal an escalation of hostility in the nearly year-long trade war between the U.S. and China. The damage done by leaving the future of trade policy unclear would have longer-term impacts on global economic stability and growth potential.
“This further leads us to view the coin as a reliable store of value, and with the market down almost double that of BTC in the past four weeks, its strength is on full demonstration.” – Read Harvey
The longer the conflict continues, the more that directly affects stock prices. Moreover, it affects the extent of investor confidence and their eagerness to support investments within the emerging markets. Tariffs have a powerful impact on economic uncertainty. This dynamic creates ugly realities both for our future bilateral trade relations and what they might do to the foreign and domestic market conditions.