Business
Stockmarkets rebounded on April 9th after Donald Trump announced a 90-day pause on his far-reaching punitive tariffs, clawing back some of their earlier losses. The S&P 500 jumped by 9.5%, adding about $4.2trn to its value. Earlier in the week global markets had gone into meltdown; $5trn was wiped off the S&P 500 in two days. The tech-heavy NASDAQ Composite also soared, having its best day since 2001. It had hit bear territory earlier, having plunged by 23% from its most recent peak. Markets in Europe and Asia also recovered. Asian stocks had endured their worst sessions in decades, with Hong Kong’s Hang Seng index plunging by 13% in a day.
The prices of America’s government bonds were battered in the market turmoil. Usually Treasuries do well in a stockmarket rout, but investors such as hedge funds were said to be cashing out of them under duress. The yield on ten-year Treasuries had jumped over a few days from 3.9% to 4.5%, increasing the cost to the government of servicing its already mighty debt.
Wall Street and business titans voiced their criticisms of Mr Trump’s trade policy, which may have been a factor in pushing him to pause his tariffs. Bill Ackman, an investor who once described the administration as the “most pro-growth” he’d seen, said he’d assumed that “economic rationality would be paramount. My bad”. (He then said he was “totally supportive of Mr Trump” and described him as “tough, but fair”.) Larry Fink warned of a “real downturn”. The share price of BlackRock, the firm he leads, is down by 12% this year. Jamie Dimon, the boss of JPMorgan Chase, said America First risked turning into America alone. Even Elon Musk was critical, calling Peter Navarro, Mr Trump’s trade guru, a “moron”.
Earlier in the week the dollar fell amid fears of a recession. Speculation swirled about how far China would go in allowing the yuan to weaken in order to boost its exports. The Chinese central bank, which manages the exchange rate at which the currency is traded, had let the yuan fall to 7.2 to the dollar, its supposed soft red line. In Japan the yen rallied against the dollar as investors piled into safe-haven assets, though the greenback rebounded on Mr Trump’s tariff reversal.
How the mighty fell
Companies that are most exposed to tariffs saw their market value slump. Among them, Apple’s share price dived by 22% over five days before bouncing back. The iPhone is assembled mostly in China and subject to the extra trade levies. Nike, which makes its sports shoes in Vietnam, saw an 18% decline in its stock. Its share price surged when Mr Trump suspended his tariffs and the Vietnamese government announced that it would hold trade talks with America.
Reports emerged about the immediate effect of tariffs on the car industry, which remain in place at 25%. Jaguar Land Rover, a carmaker based in Britain, suspended its exports to America. American ports were filling up with cars as manufacturers held their vehicles there to stop them from becoming subject to the levy.
In Britain the government slightly softened its rules surrounding the phasing-out of petrol cars. It said the ban on sales of new petrol and diesel car sales would still come into effect in 2030, but that new hybrid vehicles could continue to be sold until 2035. And small manufacturers, such as Aston Martin and McLaren, will now be exempt. The car industry’s association responded that given America’s car tariffs, which were not included in Mr Trump’s wider pause, more action would be needed.
Oil prices sank to their lowest point in nearly four years, as traders bet that demand would fall amid a possible global recession. Brent crude sagged below $60 a barrel before snapping back to $65. It started the year at $75.
India’s central bank cut its benchmark interest rate by another quarter of a percentage point, to 6%. It also indicated it would be more open to further cuts to maintain growth amid economic turmoil.
The share price of global drugs companies fell sharply, after Mr Trump hinted that the pharmaceutical industry would be his next target for tariffs. They were not included in his recent broadside. Stocks in European and Indian drugmakers were particularly hard-hit. About a third of India’s exports of generic versions of popular drugs go to America.
Deluded
Mr Trump signed another 75-day extension to find a way to allow TikTok to continue operating in America. The president suggested a deal had been close but fell apart over China’s objections to tariffs. He claimed that if he had cut China’s trade duties it “would have approved that deal in 15 minutes, which shows the power of tariffs”.