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U.S. market rally fades as China trade tensions intensify

A stock ticker shows trading at a securities firm in the Central Business District on Wednesday in Beijing. President Donald Trump announced Wednesday morning there would be a pause on higher reciprocal tariffs for an additional 90 days for most countries, but he will raise China tariffs to 125%. (Kevin Frayer/Getty Images AsiaPac/TNS)
By Colby Smith New York Times

U.S. stocks slipped in early trading Thursday as investors assessed the economic impact of the trade war, a day after President Donald Trump abruptly backed down on some of his punishing global levies. The European Union announced it would pause its retaliatory tariffs on U.S. imports for 90 days, but tensions between China and the United States showed no signs of abating as Trump left in place his steep tariffs aimed at Beijing.

Indexes in Europe and Asia rose Thursday, after the S&P 500 rallied the day before to its biggest daily gain since 2008.

Trump has left in place a base tariff of 10% on nearly all imports, as well as levies on autos, steel and aluminum. And his turnabout did not temper the greater concerns of economists who cautioned that the full repercussions from the trade tensions between Washington and Beijing would not be felt for weeks.

U.S. inflation eased more than expected in March, providing what economists say is likely to be only a temporary reprieve before Trump’s tariffs are expected to reignite price pressures. The consumer price index climbed 2.4% last month from a year earlier, with prices dropping 0.1% over the course of the month. That data, released Thursday, encompassed a period before the majority of Trump’s tariffs – including the most recent ones on China – went into effect. And despite the reprieve for some nations, economists have been warning that the tariffs now in place still will prove costly, not only leading to slower growth but also to higher inflation.

Trump ratcheted up taxes on Chinese goods to 125%, his third such increase in a week, after Beijing raised tariffs on U.S. imports to 84%, escalating the conflict between the world’s two largest economies. Trump suggested Wednesday that he was waiting to hear from China’s leader, Xi Jinping, so the two could broker a deal. China has said it is willing to hold talks, but not under duress. “China wants to make a deal,” Trump said. “They just don’t know quite how to go about it.”

Trump’s reversal prompted the EU to put its new tariffs on hold “to give negotiations a chance,” said Ursula von der Leyen, president of the European Commission, though she warned that the tariffs would take effect if talks “are not satisfactory.”