U.S. stocks are climbing in shaky trading Friday as President Donald Trump’s trade war with China escalates further.
The price of gold is rising, the U.S. dollar is falling and other financial markets are also swinging in indications of fear about where the U.S. economy will ultimately fit in the world’s.
The S&P 500 was up 1.4 per cent in afternoon trading, but only after veering repeatedly between earlier gains and losses. The Dow Jones Industrial Average was up 456 points, or 1.2 per cent, as of 12:57 p.m. Eastern time, and the Nasdaq composite was 1.6 per cent higher. Both also swung earlier, with the Dow going from a loss of nearly 340 points to a gain of nearly 500 points.
In Canada, the S&P/TSX composite index was up 2.48 per cent.
The shaky trading came after China announced Friday that it was boosting its tariffs on U.S. products to 125 per cent in the latest tit-for-tat increase following Trump’s escalations on imports from China. China’s countermeasures will take effect on Saturday.
“The U.S. alternately raising abnormally high tariffs on China has become a numbers game, which has no practical economic significance, and will become a joke in the history of the world economy,” a Chinese Finance Ministry spokesperson said in a statement announcing the new tariffs. “However, if the U.S. insists on continuing to substantially infringe on China’s interests, China will resolutely counter and fight to the end.”
Rising tensions between the world’s two largest economies could cause widespread damage and a possible global recession, even after Trump recently announced a 90-day pause on some of his tariffs for other countries, except for China.
“We remain in the early innings of this global trade regime change, and while the 90-day pause on reciprocal tariffs temporarily reversed the market selloff, it does prolong uncertainty,” according to Darrell Cronk, president of Wells Fargo Investment Institute.
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The price of gold rose more than two per cent following China’s latest escalation. It’s one of the areas of the market that investors have historically herded to when fear is high.
Other areas normally seen as safe havens aren’t seeing the same wave, though. The value of the U.S. dollar fell again against everything from the euro to the Japanese yen to the Canadian dollar.
In the rest of the world, shares wobbled following the latest escalation in the China-U.S. trade war, with Japan and some European markets slipping while others stood firm. Tokyo’s benchmark stock index initially fell more than five per cent, though it later regained some ground, closing three per cent lower at 33,585.58.
Prices for longer-term Treasury bonds, which are essentially IOUs from the U.S. government, also fell. That worried experts early in the week because bonds are typically viewed as a safe haven for investors during times of instability, but instead they were ditching U.S. government bonds given the U.S. government’s tariff policy was the source of the instability.
The yield on the 10-year Treasury jumped as high as 4.58 per cent earlier in the day, but has moderated to 4.47 per cent. It stood at 4.40 per cent late Thursday and just 4.01 per cent at the end of last week. That’s a major move for the bond market.
Higher yields crank up pressure on the stock market and raise rates for mortgages and other loans going to U.S. households and businesses, which slows the economy.
In stock markets abroad, indexes were scattershot around the world. Germany’s DAX lost 0.9 per cent, but the FTSE 100 in London added 0.6 per cent as the government reported the economy, the world’s sixth largest, enjoyed a growth spurt in February. Japan’s Nikkei 225 dropped three per cent, while Hong Kong’s Hang Seng climbed 1.1 per cent.
Chinese markets rallied after President Xi Jinping met with Spanish Prime Minister Pedro Sanchez and Beijing announced plans for Xi to visit Vietnam, Malaysia and Cambodia.
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China has been seeking to join forces with other countries in apparent hopes of forming a united front against Trump. The world’s second-largest economy is also ramping up its own countermeasures to Trump’s tariffs.
On Thursday, the S&P 500 tumbled 3.5 per cent, slicing into Wednesday’s surge of 9.5 per cent following Trump’s decision to pause many of his tariffs worldwide. The Dow Jones Industrial Average dropped 2.5 per cent and the Nasdaq composite tumbled 4.3 per cent.
