Dow recovered on hopes of Trump and Fed put; Gold zoomed

·       After electronics tariff exemptions on China, Trump may pause overall Chinese tariffs of 125% (except Fentanyl tariffs 20%) till June for negotiations

·       Fed’s Collins indicated Fed may step in in case of extreme financial stability issues as a result of Wall Street and bond market capitulation

On Thursday, April 11, 2025, Wall Street Futures stumbled as China remained defiant and promised more retaliatory measures against Trump’s bellicose tariff policies. China vowed to fight the trade war “to the end” and took steps to prop up its domestic markets (consumption). China increases measures aimed at stabilizing the stock market – the PBOC will provide more liquidity to back purchases by the country’s SWF while insurers will be allowed to dedicate more funds to the equity market. The trade conflict between the United States and China has escalated significantly in recent weeks, driven by President Trump’s aggressive tariff policies and China’s retaliatory measures.

On Friday, China again imposed another 41% retaliatory tariffs on US goods (imports) for a cumulative reciprocal tariff level of 125% since February’25 under Trump 2.0. But this time China also clarified that it will not hike tariffs further on US imports as it would be meaningless. But if Trump again some tariff or non-tariff action, China would not hesitate to impose some non-tariff barrier on the US as a reaction. Thus the overall impact of an ongoing trade war between the US and China was quite limited on Friday. Trump was also largely silent on Friday as he was preoccupied with his health checkup. But before going to the Hospital, Trump also Truthed:

“We are doing really well on our TARIFF POLICY.  Very exciting for America, and the World!!! It is moving along quickly.  DJT”

Overall, Trump’s tone was soft even after China imposed 125% reciprocal retaliatory tariffs on The US, defying his dire warning. Trump also indirectly urged his followers to buy the market by mentioning the ticker of his Truth Social Media company–Trump Media & Technology Group- as he did on April 9, before announcing the postponement of his reciprocal tariffs by 90 days. Moreover, White House Press Secretary Leavitt indicated President Trump is quite optimistic about the US-China trade deal and the progress in back-channel talks with the USTR and his Chinese counterpart Li.

Also, Wall Street Futures were buoyed by the EU’s postponement of their retaliatory reciprocal tariffs including metal tariffs, while undercut by rising UM/US inflation expectations and plunging consumer confidence data (University of Michigan). Although actual inflation data was soft, it may be because importers, producers, and also retailers may have ordered or stocked at least 3-6 months requirements in advance to beat potentially higher tariffs. Also, most of the implemented Trump tariffs were effective from April 2025 and thus there are no visible effects of Trump tariffs on US inflation data till March 2025.

On late Friday, April 11, 2025, the White House/Trump admin officially announced tariff exemptions for certain electronic products imported from China, and also other countries including smartphones, computers, semiconductors, and related components, from the steep ‘reciprocal tariffs’ previously imposed. According to a U.S. Customs and Border Protection (CBP) notice, these exemptions cover 20 product categories, such as tariff code 8471 (computers, laptops, disc drives) and items like semiconductor devices, memory chips, flat panel displays, solar cells, flash drives, and solid-state drives.

Products Exempted: Smartphones, computers, semiconductors, solar cells, flat panel TV displays, flash drives, memory cards, and solid-state drives were exempted from Trump's reciprocal tariffs. The exemptions are retroactive to April 5, 2025, allowing importers to request refunds for duties paid on these goods since that date. These products are now exempt from the previously imposed 125% tariffs on Chinese imports and the 10% global baseline tariff. However, they still face an earlier 20% tariff specific to Chinese imports related to Fentanyl.

Tariffs Exempted: The products are spared from the 125% reciprocal tariffs on Chinese imports and the 10% global universal basic tariff applied to most countries. However, a separate 20% tariff on Chinese goods, linked to fentanyl-related concerns, remains in place.

Impact: This provides significant relief to tech companies like Apple, Nvidia, HP, Super Micro Computers, and Dell, which rely heavily on Chinese manufacturing. For example, Apple, with 90% of its iPhone production in China, avoids potential price hikes (e.g., an estimated $700+ per $1,000 iPhone). Consumers are also spared sharp price increases on electronics. The decision is expected to alleviate potential price hikes for U.S. consumers and reduce financial pressures on these tech giants. Analysts had warned that the tariffs could lead to significant price increases for electronics, with some estimates suggesting up to a 79% hike for high-end smartphones. The exemptions apply to similar goods from other countries (e.g., semiconductors from Taiwan, iPhones from India), excluding them from the 10% global tariff.

Rationale: White House statements, including from Press Secretary Karoline Leavitt, emphasize that Trump aims to reduce U.S. reliance on China for critical technologies. The exemptions are paired with pressure on firms like Apple, Nvidia, and Taiwan Semiconductor (TSMC) to onshore manufacturing to the U.S.  It may be a game changer for tech amid easing fears of a category 5 price storm. The Trump administration is now almost acknowledging the challenges of relocating manufacturing from China in the short term, citing economic, industrial infra, and labor cost issues.

Future Considerations: The reprieve may be temporary. Trump has signaled a forthcoming Section 232 national security investigation into semiconductors, which could lead to new tariffs on chips and related products, though likely at lower rates than the 125% reciprocal tariffs. In retaliation, China imposed tariffs on U.S.-made chips but excluded those manufactured in Taiwan and South Korea, aiming to minimize disruptions to global semiconductor production. China faced a 145% tariff on exports to the U.S., but certain products, including semiconductors and electronics, were excluded from these additional tariffs.

China’s response was cautious after US action to exempt Computers, smartphones, and related tariff exemptions. China responded cautiously with optimism for ‘small rectification’ of US mistakes and urged to withdraw 145% of US Tariffs on Chinese goods immediately.

Trump is gradually softening his hawkish tariff narrative considering the reality of the situation:

On April 11, 2025, the Trump administration announced significant tariff exemptions for specific electronics imported from China, marking a notable shift in his hawkish trade policy. The decision follows market turmoil and a $640 billion drop in Apple’s market value after earlier tariff announcements. It reflects a balancing act between Trump’s push for domestic manufacturing and the reality that electronics supply chains are deeply rooted in Asia. China retaliated with 125% tariffs on U.S. goods, but the Semiconductor Industry Association clarified that U.S. chips made in Taiwan or South Korea are exempt, focusing duties on U.S.-manufactured chips.

The exemptions cover $101 billion of Chinese imports (2024 data), including $41 billion in smartphones and $36 billion in computers, or 22% of U.S. imports from China. This move suggests flexibility in Trump’s tariff strategy, likely influenced by big tech lobbying and consumer price concerns, but his broader trade war with China continues unabated.

On April 9, 2025, President Trump increased tariffs on Chinese imports to 145% but exempted certain electronics from these tariffs. On April 11, 2025, China raised its tariffs on U.S. imports to 125%, matching the U.S. reciprocal tariff rate. President Trump announced that he would provide more information on semiconductor tariffs on Monday, April 15, 2025.

Trump Tariff Actions on China

Trump has imposed steep tariffs on Chinese imports, with rates reaching 145% on all Chinese goods, up from 104% earlier in the week. This follows an initial 20% tariff (Fentanyl) in February, a 34% increase on April 2, and an additional 50% hike threatened if China did not retract its countermeasures. These tariffs are part of Trump’s broader “reciprocal” tariff strategy, which he claims addresses unfair trade practices and aims to reduce the U.S. trade deficit. On April 9, Trump announced a 90-day pause on higher ad-valorem reciprocal tariffs for most countries, capping them at a universal basic 10%, but explicitly excluded China for many alleged reasons by China:

·       Not calling/reaching out White House proactively.

·       Not arranging a phone call between President Xi and Trump

·       Retaliating against Trump’s initial reciprocal tariffs despite clear warning

·       Trying to form an alliance with various US allies (Japan, South Korea. India, Canada etc) against US trade policy

·       Not respecting Trump’s sentiment for a direct dialogue

China’s Response: Will not succumb to US bullying and not negotiate at gunpoint

China has vowed to “fight to the end,” implementing retaliatory tariffs of 125% on U.S. imports, up from 84% on April 10 and 34% earlier in April. Beijing has also imposed export controls on critical rare earth elements, restricted 18 U.S. companies (mostly defense-related) from its market, and added 12 firms to its “unreliable entities” list. The commerce ministry accuses the U.S. of “blackmail” and violating international trade rules, asserting that China will not yield to pressure.

Economic Impact and Global Reaction:

The tit-for-tat tariffs have fueled fears of a global recession, with JPMorgan estimating a 60% chance by year-end. Global stock markets have seen volatility, with the S&P 500 down 15% from its peak and U.S. bond yields spiking, signaling investor unease. The U.S. dollar has weakened to a three-year low. American consumers face rising costs, with estimates suggesting an average $1,300-$4000 living cost increase per person-household annually in 2025. Meanwhile, the EU, Japan, and South Korea have avoided immediate retaliation, with the EU pausing counter-tariffs to negotiate, and Japan opening trade talks with the U.S.

Strategic Context:

The current situation may be a high-stakes game of chicken, with neither side willing to back down due to respective domestic political nor ego compulsions. China believes its reduced reliance on the U.S. market, built over the years, gives it resilience, while Trump’s strategy appears to aim at forcing concessions or isolating China economically and also diplomatically. China is also trying to isolate the US in global trade.

The market is concerned that lingering trade and cold war between the two largest economies in the world, contributing almost half of the global economy (~45%) may affect at least 0.5% of global nominal GDP directly and more indirectly amid a potential synchronized global economic slowdown. Any slowdown in the US and Chinese economy may also affect overall consumption, and demand in EU/Europe, Asia/APC, and other parts of the world.

Trump’s approach lacks coherence, risking broader trade disruptions without clear gains. Chinese President Xi Jinping has called for cooperation with the EU to counter U.S. “bullying,” and also pointed out that no one wins in a tit-for-tat trade war.

Current Sentiment:

China’s defiant response may be seen as a bold stand against U.S. aggression, while others see Trump’s tariffs as a necessary pushback against perceived unfair trade. Global leaders and economists warn of a potential collapse in U.S.-China trade, which was worth over $650 billion in 2024, with ripple effects across supply chains. This escalation marks one of the most intense phases of the U.S.-China trade war since 2018, with no immediate resolution in sight. Both sides appear braced for a prolonged conflict, though Trump’s rhetoric suggests openness to a deal if China meets his terms, which Beijing has so far rejected outright. For further details on specific tariffs or negotiations- China is not ready to negotiate with the US at Trump’s gunpoint. 

Trump’s constant pressure tactics on China are not working unlike other countries and thus Trump has to initiate a phone call to Xi at some point in the coming days. China has signed new agricultural trade agreements with Spain, expanding access to Spanish pork and cherries. This move is part of China's strategy to strengthen ties with the European Union amidst rising trade tensions with the U.S. China may also import.

Trump’s continuous flip-flops on his tariff policies: Below is a summary of the tariffs implemented and those on hold under the Trump 2.0 administration as of April 11, 2025. Trump tariff policies have been fluid, with frequent announcements, suspensions, and adjustments.

Implemented Tariffs: These are tariffs that have been put into effect by the Trump 2.0 administration.

Effective April 5, 2025: A 10% minimum universal Global Tariff applies to all US imports from most countries, except where specific exemptions or higher rates apply. This was introduced as part of the "reciprocal tariff" policy to address trade deficits, and perceived imbalances and restore the US as a global/local manufacturing hub.

Exemptions:

·       Goods from Canada and Mexico compliant with the USMCA (0% tariff for compliant goods)

·       Specific products like copper, pharmaceuticals, semiconductors, lumber, certain critical minerals, energy products, and goods already subject to Section 232 tariffs (e.g., steel, aluminum, autos)

·       Goods in transit before the effective date are exempt.

Effective February 1, 2025: A 25% Tariffs on Canada and Mexico (Non-USMCA Compliant Goods)-A 25% tariff applies to non-USMCA-compliant goods from Canada and Mexico, motivated by concerns over alleged illegal immigration and fentanyl trafficking. These tariffs were framed as leverage to secure borders and combat drug flows, with exemptions preserving USMCA trade benefits.

Exemptions:  USMCA-compliant goods face a 0% tariff; While USMCA-non-compliant energy and potash from Canada face a 10% tariff

Effective February 4, 2025: A 10% tariff on all Chinese imports increased to 20% on March 4 for Fentanyl, eventually reaching 145% on April 9. This escalation has led to a severe trade standoff with China, which has retaliated with tariffs of up to 125% on U.S. goods under Trump 2.0.

Effective March 12, 2025: A 25% Tariff on Steel and Aluminum tariff expanded previous measures by removing exemptions and increasing the aluminum tariff from 10% to 25%. It also includes products like canned beer and empty aluminum cans. Section 232 tariffs on steel (25%) and aluminum (10%) remain, with tweaks to enforcement. These predate Trump 1.0 but continue, with Canada briefly facing reimposed aluminum tariffs in 2020 (later lifted).

Effective April 2, 2025: A 25% Secondary Tariff on Venezuelan Oil-Related Imports: A 25% secondary tariff targets goods from countries purchasing Venezuelan oil (e.g., China, which bought 68% of Venezuela’s oil exports in 2023). The tariff expires one year after a country ceases importing Venezuelan oil. This order was signed by Trump on March 24, 2025.

Effective April 3, 2025: A 25% tariff applies to fully imported cars, expanding to auto parts by May 3, 2025. This aims to boost domestic manufacturing but excludes autos already under Section 232 tariffs. Companies like Audi, Jaguar, and Land Rover have suspended U.S. exports due to these tariffs. Trump first imposed these auto tariffs on March 2, 2025m, but later postponed it by 30 days after a request from the US automobile lobby to prepare for the changed rule.

Effective April 5, 2025: A 10% minimum universal Global Tariff applies to all US imports from most countries, except where specific exemptions or higher rates apply. This was introduced as part of the "reciprocal tariff" policy to address trade deficits, and perceived imbalances and restore the US as a global/local manufacturing hub.

Exemptions:

·       Goods from Canada and Mexico compliant with the USMCA (0% tariff for compliant goods)

·       Specific products like copper, pharmaceuticals, semiconductors, lumber, certain critical minerals, energy products, and goods already subject to Section 232 tariffs (e.g., steel, aluminum, autos)

·       Goods in transit before the effective date are exempt.

Effective April 9, 2025: A 145% Tariff on Chinese Imports- Tariffs on Chinese goods escalated to an effective 145%, building on earlier 20% tariffs for the alleged role of Fentanyl production and subsequent distribution through Mexico and Canadian cartels and adding a 34% reciprocal tariff, with further increases by 50% and 40% to 125%; total 145% and in addition of 20% under Trump 1.0 and Biden admin between 2018-2024). Thus cumulative US tariffs on Chinese goods now are around 145%+20%=165%, while Chinese retaliatory tariffs on US goods us around 125%+20%=145%. Trump’s Chinese tariffs target China's cumulative trade surplus of over $2 trillion with the US and also issues like fentanyl precursor chemicals.

De Minimis Exemption Changes: Effective May 2, 2025, the duty-free de minims exemption for Chinese goods under $800 ends. Goods via international postal networks face a 120% tariff or $100 per item (increasing to $200 from June 1, 2025). Courier-shipped goods face standard duties.

Tariffs on Hold or Suspended: These are tariffs that were announced or threatened but have been paused, delayed, or are under negotiation.

Higher Reciprocal Tariffs on 60+ Countries: On hold for 90 days (until July 9, 2025). Initially announced on April 2, 2025, these included rates like 20% in the EU, 26% in India, 24% in Japan, 25% in South Korea, 32% in Taiwan, 36% in Thailand, and 46% in Vietnam. They were suspended to allow trade negotiations, with only the 10% baseline tariff applied during this period. Although market volatility, treasury market dysfunction, and pressure from Republican leaders and trading partners prompted a pause, Trump has indicated flexibility for deal-making and it was pre-planned.

Canadian and Mexican Tariffs: Partially on hold; While 25% tariffs on non-USMCA-compliant goods are active, broader tariffs on Canada and Mexico were delayed or softened after USMCA exemptions were clarified. Earlier threats of blanket tariffs were scaled back to focus on non-compliant goods. A 10% Tariff on Canadian Oil and Gas: Initially planned but currently suspended.

Section 232 Investigations (Copper, Lumber, etc.): Pending; Investigations into copper and lumber imports under Section 232 (national security) began March 11, 2025, with comments due by April 1. Potential tariffs are on hold until investigations conclude. The 25% Tariff on Auto Parts is scheduled to be implemented on May 3. ​

April 11, 2025-Electronics Exemptions: Certain electronics, including smartphones, computers, and chips imports (including from China) have been exempted from the highest tariffs to mitigate impacts on U.S. consumers and tech companies like Apple. However, these products still face a 20% China-specific tariff.

Retaliation: China has imposed 125% tariffs on U.S. goods (effective April 12, 2025), Canada has a 25% auto tariff, and the EU is considering retaliatory levies of 25% on $23 billion of U.S. goods, though many countries are holding off for negotiations.

Economic Impact: Critics suggest the implemented tariffs could raise U.S. household costs by $1,300–$3,400 annually on an average for one-person to three-person families, with a 0.2% GDP reduction. Supporters argue tariffs will create jobs (e.g., 2.8 million per a 2024 study) and incentivize domestic production, citing minimal inflation correlation from Trump’s first-term tariffs.

US Legal Challenges: Small businesses, such as the Florida-based stationery company Simplified, have filed lawsuits against the Trump administration, arguing that the tariffs are unconstitutional and misusing the International Emergency Economic Powers Act.

Overall, the Trump admin may require a supercomputer to record or memorize Trump’s ongoing tariff tantrum. There are worries that Trump's rapidly changing trade policies are not only upending the global economy but also jeopardizing the US's position as the world's haven, which is why volatility is not showing any signs of abating.

On Friday, a Federal Reserve official's statement that the central bank is prepared to assist in stabilizing markets, if necessary, boosted Wall Street. The S&P 500 has the best week since November 2023, while the NQ-100 recorded the best weekly gain in the last three years. But despite that US bonds are under pressure on fading optimism about the age-old US haven narrative.

On Friday, Trump said:

·       I told Putin to get moving on Ukraine peace negotiations, clock ticking (as US envoy Steve Witkoff meets Putin)

·       Physical examination went well, report to be out Sunday

·       10% tariff floor, could make some exceptions

·       Positive Outcome Expected with China

·       Always got along with Xi

·       The US Dollar will always be the preferred currency

·       The bond market did not drive the tariff pause decision

·       Desires Iran to be a content nation

·       Against Iran obtaining nuclear weapons

·       I am not going to attend the G20 meeting in South Africa

·       How could we be expected to go to South Africa for the very important G20 Meeting when Land Confiscation and Genocide is the primary topic of conversation? They are taking the land of white Farmers, and then killing them and their families. The Media refuses to report on this. The United States has held back all contributions to South Africa. Is this where we want to be for the G20? I don’t think so!

·       Trump says he wants to slash the U.S. trade deficit and achieve what he calls ‘energy dominance’

·       Trump pushes trade partners to buy more U.S. energy as a way to avoid higher tariffs

·       Exempting semiconductors from higher China Tariff

·       The exemption is retroactive to April 5th

·       Duties since April 5th on exempted on chips will be refunded

On Friday, White House Official/ Press Sec. Leavitt said:

·       Trump has stated that autos, steel, pharmaceuticals, chips, and other specific materials will be included in specific tariffs to ensure that tariffs are applied fairly and effectively

·       Trump will issue a Section 232 study on semiconductors soon

·       WH Press Sec. Leavitt: Trump intends tariff revenues to help pay down debt

·       Talks with Iran will be direct. His goal is to keep Iran from nukes for good

·       The US Envoy Witkoff is in Russia for direct communications with Putin

·       Wyckoff’s meeting with Putin aimed at a ceasefire in the war

·       If China continues to retaliate, it's not good for China

·       Trump remains open and optimistic about deal with China

·       Trump will punch back harder if the US is punched

·       The tariff rate in China remains at the 145% level

·       Trump is going on a Saudi trip. There could be more nations

·       Trump has made it clear he is open to a deal with China

·       The Treasury Secretary is keeping a very close eye on the bond market

·       Very good progress is being made in tariff discussions

·       More than 15 trade offers are already on the table

·       Trump hopes deals will be made before 90 days are up

Other Trump tariff-related new headline:

·       Trump's pharmaceutical tariffs could raise costs for patients, worsen drug shortages

·       Trump Urges Congress to Work Harder To Make Daylight Saving Permanent

·       Trump Tariffs Could Hit the Battery Storage Sector Hard

·       Trump’s doctor finds US president in ‘excellent health’ and ‘fully fit’ after physical

·       Trump Commerce chief fuels tariff confusion, says exemptions for phones, computers not permanent

·            Trump expressed strong interest in Japan's FX policy in phone talks with Japan's PM Ishiba on April 7th

·       Trump is said to have assured CEOs that a policy pivot on tariffs is underway

·       Trade War Turbulence: Chinese Airline Delays Boeing Jet Delivery In Possible Non-Tariff Countermeasure

·       Trump tariffs: China to cut number of US films screened as Hollywood becomes a target

·       Trump tariffs: Chinese chip firms shrug off trade war, as US already cut them off

·       Fed's Collins: The Fed is ready to help stabilize the market if needed

·       China urges Trump to correct mistakes and heed 'rational voices' on reciprocal tariffs

·       China Foreign Minister Wang Yi, on US tariffs: US cannot act recklessly, and the wheel of history cannot go backward

·       China says it will ignore the US on further tariff escalation

·       Chinese netizens air anger, patriotism, and anti-American views amid tariff war

On Sunday, the influential US Billionaire and Pershing Square Capital Management CEO Bill Ackman urged President Trump to pause the 145% tariff on Chinese goods for 90 days and lower it to 10% during this period, just as he did for other countries, opening the avenue for trade negotiation.

Ackman tweeted:

“By launching the tariffs on April 2nd, President @realDonaldTrump has enabled our trading partners to experience the visceral impact of the tariffs on their markets, companies, and citizens, and he has shown that he is prepared to do what is necessary to address unfair trading practices.

The result has been nations lining up to negotiate deals with the administration. So far so good.

By pausing reciprocal tariffs for 90 days and exempting certain goods from tariffs this weekend, he has also shown considerable flexibility in understanding the challenges to US companies in adapting to the tariffs overnight.

By leaving a 145% tariff on China for the last few days, he has sent a message to China about the consequences to China of retaliating rather than coming to the negotiating table.

The problem is that there remain millions of small and medium-sized American businesses that suffer from an inability to adapt to the tariffs on China overnight.

If President Trump were to pause the China tariffs for 90 days and reduce them temporarily to 10%, he would achieve the same objective in causing US businesses to relocate their supply chains from China without the disruption and risk to these businesses in the short term, and he would have time to negotiate a deal with China.

China is under the same pressure to negotiate a deal whether the tariffs take effect immediately or if they take effect in 90 days.

The benefit of waiting 90 days is twofold. It gives all US businesses the opportunity to make supply chain adjustments, and it gives China the opportunity to show that it is willing to negotiate a trade deal in good faith.

If China does not cooperate and negotiate a deal that makes sense for our country, President Trump can bring the hammer down in 90 days.”

On Sunday, April 14, 2025, Trump posted in his Truth handle about Chinese exemptions on electronic items:

“NOBODY is getting “off the hook” for the unfair Trade Balances, and Non-Monetary Tariff Barriers, that other Countries have used against us, especially not China which, by far, treats us the worst! There was no Tariff “exception” announced on Friday. These products are subject to the existing 20% Fentanyl Tariffs, and they are just moving to a different Tariff “bucket.” The Fake News knows this, but refuses to report it.

We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations. What has been exposed is that we need to make products in the United States, and that we will not be held hostage by other Countries, especially hostile trading Nations like China, which will do everything within its power to disrespect the American People. We also cannot let them continue to abuse us on Trade, like they have for decades, THOSE DAYS ARE OVER!

The Golden Age of America, which includes the upcoming Tax and Regulation Cuts, a substantial amount of which was just approved by the House and Senate, will mean more and better paying jobs, making products in our Nation, and treating other Countries, in particular China, the same way they have treated us. The bottom line is that our Country will be bigger, better, and stronger than ever before. We will MAKE AMERICA GREAT AGAIN!”

Conclusions

Trump is gradually softening in his hawkish China tariff narrative as he may be now realizing the reality that the US is still far away from becoming a viable alternative for the Chinese manufacturing hub; it’s not only the question of China’s relatively cheaper labor force, but China's extensive supply chain, infrastructure, and skilled workforce in supporting high tech industry. And China’s labor cost is now no longer cheap as China is also now a developed country at least urban China.

Also, the US is far behind in terms of China’s manufacturing and logistical infra. Apart from ordinary American consumers, various big US corporates and also MSMEs are largely dependent on China's supply chain for their requirements; it’s not easy to make the US or any other country a viable alternative to China to match their scale, efficacy, quality and cost.

China will negotiate with the Trump admin in a mutually respectful environment; will never negotiate at gunpoint. But the question is why there is a requirement for another trade deal with China after a comprehensive trade deal in 2020 and that too after 2 years of marathon negotiations bet, why is there a need for another China trade deal? Trump should propose a 5-10% universal tariff and GST for every country, ensuring free & fair access for all.

Trump often blames the onus of the US merchandise trade deficit on China and other exporter nations including some of US allies. Trump also blamed China, Mexico and even Canada for illegal drug and human trafficking into the US. But before blaming someone, Trump should have repaired their own house and introspected, why China is outpacing the US in trade, education, innovation, healthcare, infra development, techs and even military jets.

The US has to reset now to compete with China rather than burning down in jealousy. Trump should also introspect why Americans are increasingly addicted to drugs and crimes. Drug addiction & supply chain is a global issue; no specific country can be blamed for this and it’s a collective responsibility also. Why the US is failing to prevent drug and human smuggling?

Trump needs higher revenue to fund his deficit spending like tax cuts and other planned infra stimulus. Thus he is eager to impose higher tariffs on Americans in the name of China & other exporters. Exporters will stop accepting orders from US importers rather than paying such Trump tariffs at gunpoint. China may even scrap the phase one trade deal with the US and even stop sending goods to the US.

In reality, the US and China are both dependent on each other for prosperity and development. Both the US and China have coexisted for decades in a win-win situation. Despite significant expansion & diversification in global trade, the US is China's number one client at around $500 billion annually.  For the US, China is also the largest market after the EU and many US MNCs are quite dependent on Chinese revenue.

The US may not find an alternative global or local supply chain instead of China and China may also face difficulties in finding a single alternative for America.  However, China is at an advantage due to its strategic expansion of trade globally for the last two decades rather than being too dependent on any single country or trade block like the US and EU. 

Thus we may soon see signs of reconciliations rather than engaging in protracted trade confrontations. Back channel talks may have already started between the US and China, which may take a definitive step towards a phase two trade deal by the next 90 days. China will negotiate from the position of strength, and mutual respect, not US bullying.

Trump Admin and its core advisory team are divided between China & tariff hawks and doves. Trump is also under pressure from his corporate donors & active advisors like Musk, various prominent Republican Leaders, and Wall Street along with Main Street. Thus Trump is now showing more compulsion for an immediate trade deal with China and blinking first.

America is not a manufacturing power hub; it has to import almost half of its domestic merchandise requirement. Cheaper imported goods help to maintain the overall lower cost of living and the Goldilocks nature of the US economy. If Trump's tariffs are implemented at face value, American families are -with estimates suggesting an average $1,300-$4000 increase per year for a person to a small typical family of three. This would be very difficult for a typical middle-class American family most of which live paycheck to paycheck.

Although Trump's logic about higher tariffs and targeted regulation on certain other countries is right, it does not apply to China, especially after the 2020 Phase One China trade deal. The US political and policy uncertainty is now a big headache for the rest of the world and also US investors.

Trump could have introduced Federal sales tax on goods & services like 10% GST or VAT along with a minimum basic universal tariffs of 5-10% globally coupled with no targeted non-tariff barriers by all countries. But this may not be the case and it's almost impossible to negotiate with 100-odd countries worldwide for a definitive bilateral trade deal within this short period of 90 days.

Thus eventually, Trump may scale back his reciprocal tariffs completely and may impose only a 5-10% universal basic tariff for all including China for the sake of the US economy. At the same time, Trump may provide fresh income tax cuts for American workers and businesses to undo the tariff damage on the US economy.

Trump will use reciprocal tariff threats on various countries like India to reduce its exorbitantly high tariffs and very stringent regulations against free & fair trade. India or even the US can't encourage inefficiencies by promoting higher tariffs and non-tariff barriers. Higher tariffs and local sales taxes cause higher cost of living and distort price stability. And without price stability, no economy can function properly as we have seen in the case of Tariff & GST King India.

Trump already blinked and postponed reciprocal tariffs rhetoric after Japan attempted some US Treasury selling on April 9, 2025, but failed due to a lack of buyers on the other side, resulting in an almost dysfunctional US Treasury market and resultant Wall Street capitulation.

Bottom line

Trump’s comments about keeping patience amid Wall Street turmoil and urging traders/investors to buy the market along with the overall Chinese tone indicate back-channel negotiations between the two largest economies in the world, controlling almost 45% of global nominal GDP. The US and China may soon officially reach out to each other to resolve this trade issue. Trump may soon announce a 90-day pause for Chinese tariffs also, keeping only the 20% Fentanyl tariffs for the time being, which may be reduced to universal basic levels of 10% by the next few weeks after China takes some ‘bold steps’ in addressing the US concern of Fentanyl production & trafficking. Trump and Xi both will move after satisfying their respective domestic political compulsion.

Market impact:

On early Monday, Wall Street Futures continued its Friday surge on hopes of real progress in the US-China/global trade & tariffs deal. Big techs led the rally on tariff exemptions for electronic products. Last week, markets initially sold off amid growing concerns over the global trade war but rebounded sharply after Trump announced a 90-day delay on most of the tariffs. The Dow gained 4.95%, the S&P 500 climbed 5.7%, and the Nasdaq Composite surged 7.29% in one of the best weekly gains in the last few years.

Gold scaled a new life time high of almost $3245 on haven appeal, replacing US bonds amid the Trump trade war tantrum and the increasing US tendency to use USD as a weapon in geopolitical issues; US bond yields are surging because many foreign central banks are exiting US bonds to enter in Gold, Yuan/China and even INR/India bonds. If Trump does not correct himself, the US economy, USD and also UST bonds may soon lose their age-old haven appeal; EUR, GBP, JPY and even CNY, and INR are getting a boost apart from Gold & Silver.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 40700) now has to sustain over 40100 for a further rally towards 41300/42300-43300/44600, and even 45200 in the coming days; otherwise sustaining below 40000, DJ-30 may again fall to 39700/38600-37000/36200 in the coming days.

Similarly, NQ-100 Future (19000) has to sustain over 19300 for a further rally to 196000/20000-20900/21400 and even 22000-22400 in the coming days; otherwise, sustaining below 19250, NQ-100 may again fall to 18600/18000-17600/16400 and 16200-15800 in the coming days.

Also, technically Gold (CMP: 3240) has to sustain over 3265-3275 for a further rally to 3305/3325*-355/3400 and even 3450/3500-3525/3555 in the coming days; otherwise sustaining below 3255-3245, Gold may again fall to 3180/3130-3065/2990 and 2960/2900*-2800/2750 in the coming days.