US Markets Suffer Losses Amid Intensifying Trade War and Federal Reserve Concerns

In the week ending April 18, US markets faced significant setbacks as the ongoing US-China trade war intensified and Federal Reserve Chair Jerome Powell warned of a future marked by slower economic growth and rising prices. Notably, the Nasdaq Composite Index saw a decline of 2.62%, while the Dow Jones Industrial Average and the S&P 500 dropped 2.66% and 1.50%, respectively. Investors were particularly rattled after President Trump escalated tensions by raising tariffs on select Chinese imports to an unprecedented 245% and imposing strict export restrictions on semiconductor chips to China. This move had a sizable impact on major tech stocks such as Nvidia, which fell by 8.51% for the week. In a stark contrast, Boeing's shares rose by 3.23%, seemingly unaffected by China’s demand for airlines to halt deliveries. On the bond market front, the yield on 10-year US Treasury notes declined by 16 basis points, closing the week at 4.333%. Meanwhile, the US Dollar Index decreased by 0.47%, marking a continuous decline over four weeks. Despite positive indicators from US retail sales and labor market statistics, the gravity of tariff negotiations and Powell’s forecast shadowed market sentiments. In the context of China's economy, recent data revealed a year-on-year GDP growth of 5.4% for Q1 2025, surpassing the consensus of 5.1%. This robust growth suggests that China's policy measures may be effective in countering US tariff impacts, bolstering consumer activity and job gains. However, experts warn that the prolonged trade conflict poses risks to China's labor market and domestic demand. Financial institutions like Morgan Stanley and UBS have revised their growth forecasts for China downwards, hinting at the complications arising from ongoing geopolitical tensions. Meanwhile, the Hang Seng Index managed to break its five-week losing streak, rising 2.30% amid hopes for further stimulus and positive data. Amidst these developments, other Asian markets showed resilience as well. The ASX 200 rose by 2.26% thanks to higher commodity prices, while the Nikkei Index increased by 2.13%, buoyed by encouraging US-Japan trade discussions. Looking ahead, investors are urged to remain vigilant as updates are anticipated from Beijing, particularly regarding policy shifts aimed at sustaining growth amid external pressures. The focus will be particularly on how the US and China navigate the intricacies of dialogue in their ongoing trade disputes. Overall, the current market situation underscores the critical importance of remaining informed about geopolitical developments and economic policies.