After three days of global market turmoil not seen since the early days of the Covid-19 pandemic, stocks regained a measure of calm on Tuesday despite little letup in the escalating trade tensions caused by President Trump’s tariffs. The S&P 500 gained more than 3 percent in early trading, regaining some ground after a brutal three-day slide that at one point on Monday pulled the benchmark close to a bear market, or a drop of 20 percent or more from its recent high. Before markets opened in China, the government unleashed a series of measures to stabilize stocks, leading to a rebound in share prices in Hong Kong and mainland China. Stocks in Japan also gained 6 percent, while markets in Taiwan continued to drop, prompting the finance ministry to activate a $15 billion stabilization fund.
The Stoxx Europe 600 gained 3 percent, with nearly every major market in the region in the green. Despite the gains, the pan-European benchmark remains about 15 percent lower than its peak in early March. Stéphane Boujnah, the chief executive of Euronext, which operates several stock exchanges across Europe, commented that the disruption caused by tariffs had made the U.S. markets “unrecognizable” to investors, leading to a shift of some money to Europe from the United States. Business leaders and analysts are increasingly concerned that escalating trade tensions could cause lasting damage to the global economy, with some bank economists already predicting a recession later this year.
Jane Fraser, the chief executive of Citigroup, warned that tariffs could lead to a fundamental shift in trade and capital flows, urging preparation for potential changes. A survey of small businesses in the United States revealed a decline in confidence for a third straight month, reflecting growing economic growth worries in other markets, such as the price of oil. The 10.5 percent drop in the S&P 500 on Thursday and Friday was the worst two-day decline for the index since the onset of the coronavirus pandemic in 2020. Despite this, Mr. Trump continued to escalate trade tensions by issuing a new ultimatum to China to rescind its retaliatory tariffs on U.S. goods or face additional tariffs of 50 percent beginning Wednesday.
Scott Bessent, the U.S. Treasury secretary, criticized China for its stance on tariffs, implying that they were making a mistake. Following Beijing’s response, several government departments and enterprises in China pledged to maintain the smooth operation of the capital market. The People’s Bank of China vowed to support Central Hui Jin Investment and many government-owned companies announced share buybacks. This intervention by China’s “national team” is reminiscent of efforts made during a market crisis in 2015 and aligns with President Xi Jinping’s strategy of presenting China as a stable force against global economic turbulence caused by Mr. Trump’s tariffs. However, the effectiveness of China’s actions remains uncertain, as Mr. Trump’s tariffs could have a deeper impact on China’s economy beyond just market psychology.
The global market turmoil triggered by Mr. Trump’s tariffs has sparked concerns among business leaders and economists about the potentially lasting damage to the global economy. Despite the rebound in stock markets in Europe and Asia, the long-term effects of the escalating trade tensions remain uncertain. The situation is further complicated by China’s response to the tariffs, with both sides showing no signs of backing down. As the situation continues to evolve, investors and businesses must navigate the unpredictable terrain of the global economy. The effects of trade wars and market disruptions could have far-reaching implications, potentially leading to a recession later in the year. Amid these challenges, it is essential for governments, businesses, and investors to adapt and strategize to mitigate risks and safeguard against further economic instability.
