US-China Trade War: No Winners, Losers Only!
On Tue, 08 Apr 2025, what was supposed to be a bright spark turned gloomy, shortly after 10am.
This about turn came after Trump decided to carry out his threat to impose a further +50% tariffs (totaling a ridiculous +104%) on China, with effect from Wed, 09 Apr 2025. (see above)
For the 2nd day in week of 07 Apr 2025: (see above)
-
DJIA: -0.84% (-320.01 to 37,645.59).
-
S&P 500: -1.57% (-79.48 to 4,982.77). Lost lost $5.8 trillion in market value over 4 days.
-
Nasdaq: -2.15% (-335.35 to 15,267.91).
With a negatively charged sentiments, even economic report like the National Federation of Independent Business (NFIB) Small Business Optimism Index, could not have any effect on the market. (see below)
For March 2025, the NFIB Small Business Optimism Index has declined by -3.3 points to 97.4, that is below the 51-year average of 98.
Uncertainty Index also decreased by -8.0 points from February’s 2nd highest reading to 96.
Key Findings:
-
Taxes: 18% of small business owners said taxes were their biggest problem, up 2 points from February. This is the highest since November 2021.
-
Business Conditions: Owners expecting better business conditions dropped -16 points to 21% (seasonally adjusted), marking the 3rd monthly decline and biggest drop since December 2020.
-
Business Health: 11% rated their business health as excellent (unchanged). 53% said it was good (down by -2 points). 31% said it was fair (up +4 points) and 4% said it was poor (down -2 points).
-
Labour Quality: Labour quality remained the top issue at 19%, unchanged from February 2025. Taxes followed closely at 18%.
-
Sales Expectations: Owners expecting higher sales volumes dropped -11 points to a net 3% (seasonally adjusted), continuing a 3-month decline after earlier improvements.
-
Inflation: Inflation was named the most important problem by 16% of owners (unchanged from February), falling from its previous rank as the 2nd-biggest issue.
-
Selling Prices: The number of owners raising average selling prices fell by -6 points to a net 26% (seasonally adjusted), the largest drop since December 2022 but still historically high.
-
Planned Price Hikes: A net 30% plan to raise prices in March, up +1.0 point from February, marking the highest level since March 2024.
-
Borrowing: Regular borrowing increased to +28%, up +4.0 points from February’s lowest level since May 2022.
The Russell 2000 index has also fallen by -11.89%, based on past 5 trading days. (see above)
Like the 3 US composite indexes, the plunge came fast and furious since 03 Apr 2025.
With trade war declared between the world’s 2 largest economies, things are going to get a lot more volatile before it gets better, eventually.
Foolishly enough, US Treasury Scott Bessent decided to count his chickens even before they are hatched, declaring that it was a mistake that China decided to challenge the US. (see above)
His feeble argument was “We export one fifth (or 20%) to them of what they export to us“.
He failed to mention US is unable to manufacture those imports and for that price.
Raising tariffs to +104% is going to hurt American citizens and businesses.
The US economy was humming when it was handed over 3 months ago, will now suffer the followings over the coming months:
-
Rising prices on everything from groceries to clothing to cars.
-
Rising inflation.
-
Falling corporate profits and business spending.
-
Declining US growth.
-
Rising unemployment.
-
Cratering stock and bond prices causing …
-
Crushing losses in retirement income and 401-ks and quite possibly….
-
Recession in the US.
In addition, “uncertainty” among individuals, companies and investors that plagued the run-up to tariffs has been heightened, because neither Trump, Bessent nor Lutnick have a clue on how other countries will react.
US Top 20 Creditors.
Another thing that Bessent did not mention is, China is the 2nd largest holder of US Treasury bonds to the tune of $759 billion. (see above)
This means China is a “creditor” of the US government.
(US) As a debtor, would fare better if it remains humble and just go about raising its tariffs without being too pompous, right.
When the "pushing becomes chafing", there is nothing to stop China from liquidating its US bonds holdings; with hindsight that doing so would harm China, themselves too.
Damages to US.
-
Increase US interest rates (flooding US market with bonds, reducing their price).
-
Damage US stock market (via higher borrowing costs and reduced corporate profits).
However, such a move would also:
-
Devalue China’s remaining Treasury holdings.
-
Undermine the Chinese Yuan’s stability, harming China’s export-driven economy.
Although, large-scale liquidation by China is unlikely, targeted sales could cause short-term volatility to US could be a “viable” retaliatory option.
My viewpoints: (mine only)
After these tariffs’ antics, there is no turning back for the US with what used to be friends and allies.
Regards for US as the leader in the “democratic” world is very much in doubt because every country that endured the disruptive tariffs will choose to do business (where possible) with more “non-US” countries.
The rise of BRICS as an economic bloc on the international stage might gain traction while association with the US will gradually be cut back, ever so slightly, overtime.
Already there were more countries opting to join BRICS, including Indonesia.
Who knows Vietnam, Malaysia, Thailand, Cambodia (casualties of current tariffs) might submit their applications at the next AGM.
Time to invest ?
Nasdaq stocks have been hit particularly hard, over the past 5 trading days.
Top 3 stocks that have declined most (since 03 Apr 2025):
-
$Apple(AAPL)$. Lost about -22.12% of its stock price because in-sourcing will not be an option for considerations. (see below)
-
$Tesla Motors(TSLA)$. The car maker has lost approx. -$12.84% in its stock price and is poised to fall further, given that consumers are still mad with his DOGE antics.
-
$Meta Platforms, Inc.(META)$ has lost about -11.07% in its stock price.
Meta's main revenue stream - “advertising” is falling and has investors worrying.
Is now the “right” time to invest in Tech or S&P 500 stocks ?
Personally, I do not think so. (see below)
Dusts for current tariffs turmoil has not even settled and Mr Orange face is already up to his no good.
Is it possible he's pleased with the global chaos he has created, so that:
-
Focus no longer centred on the scandal surrounding his Defense minister use of Signal app to communicate US war plans.
-
US national debt takes a back seat, away from prying eyes over the possibility of an impending government shutdown due to lack of funds, by late Summer.
With stock markets in both Asia and Europe crashing on Wed, 09 Apr 2025, US market is likely to follow suit when it resumes trading. Therefore, its best to stay at the sideline for now.
Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.
-
Do you think US market will continue to pull back today ?
-
Do you think it is best to just observe for the time being and not accidentally catch some falling knives ?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Pls "Re-post" so that more get to know. Tks! Rating is important (to me).
Consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!!
Great article, would you like to share it?