Market Report.
🗣️ Late on Tuesday, Trump remarked that the current 145% tax on Chinese goods, described as “very high,” would not remain at that level, pledging a significant reduction while clarifying it would not drop to zero. His tempered tone marked a notable shift from the aggressive rhetoric he employed earlier in April. Meanwhile, China has shown openness to discussions but refused to offer concessions, maintaining a resolute stance in the ongoing trade conflict. Foreign Ministry spokesman Guo Jiakun emphasized on Wednesday that while China does not fear a fight, they prefer dialogue, asserting, “If we fight, we will fight to the end; if we talk, the door is wide open.”
💼 Treasury Secretary Scott Bessent sees an “opportunity for a big deal” on trade issues between the U.S. and China, suggesting a “beautiful rebalancing” is possible. Bessent outlined a “blueprint to restore equilibrium to the global financial system,” criticizing “mission creep” at institutions like the IMF and World Bank. He argued the World Bank should stop lending to countries like China that have advanced economically and no longer need development assistance. However, the administration is reportedly considering reducing tariffs on China from 145% to 50-65%, still very high but a potential de-escalation of the trade war.
⚖️ A group of 5 small businesses have sued President Trump, seeking to block the new tariffs he has imposed on foreign imports in recent weeks. The lawsuit alleges that Trump has illegally usurped Congress’ power to levy tariffs by claiming trade deficits constitute an “emergency” under the International Emergency Economic Powers Act (IEEPA). The lawsuit claims Trump has imposed tariffs even on countries the U.S. does not have trade deficits with, “further undermining the administration’s justification.” One plaintiff, Terry Precision Cycling, estimates the tariffs will cost them $1.2 million by 2026, an amount they say is “simply not survivable” for a business of their size.
🚗 President Trump is planning to spare carmakers from some tariffs following intense lobbying by industry executives. However, the 25% tariff Trump imposed on all imports of foreign-made cars will remain in place, as will the 25% duty on foreign-imported car parts. The Center for Automotive Research estimates Trump’s 25% tariffs on automotive imports will escalate costs for automakers by about $108 billion in 2025. Companies like Tesla and Ford have already faced challenges from the tariffs, with Tesla suspending plans to ship components from China and Ford halting shipments of some vehicles to China.
🤝 US Vice President JD Vance says America and the UK are “working very hard” on a trade deal and he believes they will reach a “great agreement.” Vance says President Trump “really loves the United Kingdom” and there is a “real cultural affinity” between the US and UK, giving Britain a more advantageous position than other European countries in trade negotiations. Vance criticizes Europe for underinvesting in defense and becoming overly reliant on US security subsidies. UK Chancellor Rachel Reeves will continue trade negotiations with the US later this month, highlighting the ongoing efforts to reach a US-UK trade deal under the Trump administration.
🌍 Meanwhile in Europe, the EU has struck hard at U.S. tech giants, fining Apple €500 million ($571 million) and Meta €200 million ($228.4 million) for violating the Digital Markets Act (DMA). Apple stands accused of breaching “anti-steering” rules by restricting developers from directing users to alternative offers outside the App Store. The tech giant, insisting the EU is unfairly targeting it with demands users didn’t request, plans to appeal the decision. Meanwhile, Meta faces penalties for coercing users into sharing data or paying for ad-free Facebook and Instagram experiences under its subscription tier. Meta’s global affairs chief blasted the ruling, calling it a “multi-billion-dollar tariff” that stifles European businesses by limiting personalized ads. The EU has given Meta 60 days to adjust its ad options or risk further sanctions.
💥 This crackdown could reignite tensions with the U.S., as former President Trump previously threatened retaliatory tariffs over the EU’s regulation of American tech companies. The battle underscores the growing clash between Silicon Valley’s dominance and Europe’s regulatory ambitions.
📉 The preliminary composite euro zone Purchasing Managers’ Index dropped to 50.1, barely above the 50 mark separating growth from contraction, as the recent increases in U.S. tariffs and associated market fallout have caused economic sentiment to plummet. The euro zone services sector has turned with activity shrinking instead of growing, pushing the whole economy into stagnation territory. In Germany and France, the private sector contracted this month, hurt by service sector woes and trade-related uncertainty.
💶 European Central Bank Governing Council member Madis Muller says the ECB may have to lower interest rates to stimulate the economy if trade uncertainty proves more damaging for growth. Muller notes that borrowing costs have already reached levels that no longer restrict demand, and the ECB will have more clarity on tariff negotiations between the US and Europe by the time it sets policy in June. Muller says the appreciation of the euro will have a negative impact on the price competitiveness of European exporters and put some limited downward pressure on inflation, but this effect is not expected to be significant.
🇩🇪 Bundesbank President Joachim Nagel says the German economy could suffer “a slight recession” in 2025, contracting for a third consecutive year for the first time. The German government has already cut its economic forecast for this year, now expecting stagnation instead of 0.3% growth. As an export-oriented economy, Germany is highly vulnerable to the U.S. tariffs, with the U.S. being Germany’s biggest trading partner in 2024. He acknowledges the German economic model based on exports and industry is shaking, with industrial production in decline since 2017, but believes it can adapt to the challenges. Nagel expects euro zone inflation to stabilize at the ECB’s 2% target this year, despite the high level of uncertainty, saying central banks are used to dealing with such situations.
🌐 Geopolitics:
🤔 U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskyy clashed again over efforts to end the three-year-old war in Ukraine, with Trump chiding Zelenskyy for refusing to recognize Russia’s occupation of Crimea. Trump’s Vice President JD Vance said it was time for Russia and Ukraine to either agree to a U.S. peace proposal “or for the United States to walk away from this process.” The proposal calls for freezing territorial lines and a long-term diplomatic settlement. However, Zelenskyy reiterated that Ukraine would never cede Crimea to Russia, which Trump said made peace harder to achieve. Trump argued Crimea was lost years ago and is not even a point of discussion.
📜 World Economic Forum (WEF) founder Klaus Schwab, 88, has resigned as chairman after 55 years, following a whistleblower’s allegations of financial and ethical misconduct by Schwab and his wife based in a ZeroHedge article. An anonymous letter sent to the WEF board by current and former employees accuses the Schwabs of commingling personal affairs with WEF resources without proper oversight. Schwab initially denied the allegations and threatened legal action, but the WEF board launched an independent investigation, leading to Schwab’s immediate resignation. The Schwabs deny the whistleblower’s claims, but the WEF says the board unanimously supported the investigation based on the whistleblower letter.
🚢 The EU and UK are reportedly gearing up to impose a naval blockade on Russia, according to Nikolay Patrushev, a senior aide to Russian President Vladimir Putin. Patrushev, who chairs Russia’s Maritime Board, warned that “hotheads” in European capitals should be aware that Moscow’s navy would be able to protect its shipping and respond to any such move. Patrushev stated that sanctions plans by the UK and some EU members resemble a maritime blockade. The British Navy has been shadowing Russian ships near its waters.
📊 Market View:
📉 Futures in the United States are losing momentum after yesterday’s gains and recovery. The S&P 500 has fallen back again and is currently at 5,390 points. Nasdaq 100 futures are reacting similarly, falling back towards 18,750 points.
📉 In Europe, where indices staged a strong recovery yesterday, slight declines are also occurring. DAX 40 futures are retreating towards 20,040 points at the moment, and Eurostoxx 50 futures are retreating towards 5,025 points. The DXY dollar index climbed to 100 points yesterday, but in the last few hours it has fallen back to 99.60. This movement caused the EUR/USD pair to fall yesterday from 1.1440 to 1.1350.
🛢️ Crude oil also fell sharply after exceeding $68 per barrel of Brent, dropping in recent hours to its current level of $65.60.
💰 The strength of the dollar caused gold to fall below $3,300 yesterday, but it has recovered and is currently trading at $3,330.
🪙 Bitcoin continues its upward trend. Yesterday, it approached $95,000 but has fallen back in recent hours and is now trading at around $92,500.
