Art of the deal or the art of bluff? One thing is for sure: financialmarkets will not be getting bored any time soon, given the White House’s recenttariff U-turn.

On Wednesday, US President Donald Trump surprised markets once again byannouncing that imported products from more than 180 US trade partners would besubject to a 10% tariff for the next 90 days, in sharp contrast to thereciprocal tariffs list he had published the previous week. The USadministration suggested that this move would help negotiations with thecountries willing to sign new trade deals.

However, the 90-day Trump tariff pause does not apply to China. Beijingbecame the target of new tariffs, and its products are now facing a total rateof 125%, effective immediately. In a social media post, President Trump saidthat he raised tariffs on Chinese imports due to the ‘lack of respect thatChina has shown to the World’s Markets’. Just a few hours before Trump’sreciprocal tariff roll-out, China had announced its plan to raise the tariffrate on imports from the US to 84%.

Trade War: StrategicBacktracking or Disorderly Retreat?

Did President Trump ‘blink’ or was it a calculated strategic move? Thisquestion will likely be a topic of debate among market analysts over the nextfew days. While White House officials praise Trump for his rapid strategyshift, some economists suggest that a worrying slump in bond prices had the USPresident on the ropes.

Commenting on Trump’s change of strategy, economist Nouriel Roubini wrote onX that the US President’s decision came on the back of a rise in bond yieldsand fears over a potential US dollar (USD) collapse.

Roubini’s words may be on point since the US$29 trillion US Treasuriesmarket saw the 10-year US Treasury bond yield spiking to 4.51% in the lastcouple of days, the highest level recorded in the past two months. High bondyields mean the US government would have to pay elevated borrowing costs torefinance its debt. After yesterday’s announcement, the 10-year US Treasurybond yield fell to 4.27%.

European and Asian StockMarkets Rally; Optimism Prevails

Financial markets in Asia and Europe got a boost on Thursday, covering someof the ground lost since ‘Liberation Day’. Investors’ optimism got renewed asglobal recession fears retreated, in hopes that the White House’s punitivereciprocal tariffs could become a thing of the past.

In Asia, Japan’s Nikkei 225 ended the day at 34,609, jumping by 9.13%. SouthKorea’s KOSPI rose by 6.60%, closing at 2,445.06, while the AustralianS&P/ASX 200 climbed 4.54%, closing at 7,709.60.

Although the trade war between the US and China seems to be raging on, theChinese CSI 300 recorded a 1.31% rise, followed by Hong Kong’s Hang Seng Index,which soared by 2.06%.

Europe followed suit earlier today, with the UK’s FTSE 100 surging by 6.0%.Bank and mining-related shares led the charge before the index retreated toslightly lower levels. Germany’s DAX 40 opened the day 8.0% higher, with theFrench CAC40 index also strengthening, registering a 6.5% rise.

US Dollar and Oil Fall; GoldPrices Rise

The US Dollar Index (DXY) dropped by 0.9% to 101.89, reflecting thecurrency’s weakness against its major competitors. The euro gained 0.8% againstthe US dollar (EUR/USD), trading at US$1.104. The British pound also roseagainst the USD with cable (GBP/USD) trading at US$1.287, at the time ofwriting.

Gold prices reached US$3,107 per ounce, soaring 0.8%, potentially due to theprecious metal’s safe-haven status. On the contrary, oil prices dropped, withthe West Texas Intermediate (WTI) oil trading at US$59.96 per barrel (-3.72%)and Brent oil trading at US$63.235 per barrel (-3.41%). Bitcoin (BTC) also tooka hit, slumping 0.94% and trading at US$81,829.

Written by the FP Markets Research Team

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