Global stock markets declined on Friday following US President Donald Trump’s threat to impose tariffs on China, while oil prices retreated as tensions in the Middle East eased after the Gaza ceasefire. Trump criticized China’s trade practices, including the imposition of new export controls on rare earths, and warned of “massive” tariff hikes. He also stated that other countermeasures were being considered and that a meeting with Chinese President Xi Jinping later this month was no longer necessary.
This development led to a sharp decline in Wall Street’s major indices, with the Nasdaq falling by 2% in late morning trading. The dollar also weakened against its main rival currencies. The tensions between Washington and Beijing had been easing after a tit-for-tat tariffs war earlier this year, with the Trump-Xi meeting expected to help prolong a fragile truce. However, China’s announcement of new controls on the export of rare-earth technologies and items on Thursday added to regulations on a critical industry that has been a key source of tension between the two countries.
Oil prices had already fallen by more than 2% as the Gaza ceasefire took effect, easing concerns about a wider regional conflict that could disrupt supply. The US benchmark oil contract, WTI, fell below $60 per barrel. Trump’s comments on China, which threatened to slow trade and economic activity, sent prices down further, with both WTI and Brent declining by more than 3% as European markets closed. European markets also slid after Trump’s comments, with Paris finishing the day down 1.5% as French President Emmanuel Macron was due to pick a new head of government.
The week had seen a raft of new records in several markets, with the tech-heavy Nasdaq index, the Frankfurt stock exchange, and gold prices reaching new heights. Silver also surged to a decades-long high. The spending on artificial intelligence, including multi-billion-dollar chip deals signed by ChatGPT-maker OpenAI with US firm AMD and South Korean firms Samsung and SK hynix, had boosted buying sentiment. However, there are concerns that the rally could run out of steam, causing jitters on trading floors. The debate about the AI bubble remains a hot topic, with some arguing that it is the new internet bubble waiting to burst, while others think it still has room to inflate.
As of 1530 GMT, key figures showed significant declines in major stock markets, including the Dow, S&P 500, and Nasdaq Composite. The euro and pound rose against the dollar, while the dollar fell against the yen. Brent North Sea Crude and West Texas Intermediate oil prices also declined. The developments highlight the ongoing trade tensions between the US and China, as well as the impact of geopolitical events on global markets. The situation is likely to continue to evolve, with investors closely watching the next steps in the trade dispute and its effects on the global economy.