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Global Trade War Escalates, Markets Plunge

President Donald Trump’s decision to impose sweeping tariffs on all imports has ignited a global trade war, prompting swift retaliation from China, the European Union, and other major economies with their own tariffs. The announcement, detailed in a Reuters report on April 4, led to immediate market turmoil, with the S&P 500 dropping 6% on Friday—its worst two-day loss since the 2020 pandemic—erasing over $5 trillion in market value. The Nasdaq followed suit, plummeting 7.2%, as reported by Bloomberg, reflecting fears of disrupted supply chains and rising costs. Federal Reserve Chair Jerome Powell, speaking at a press conference covered by the Wall Street Journal, warned that the tariffs could fuel “higher inflation and slower growth,” though he signaled the Fed would hold off on rate adjustments until June to assess the fallout.

The tariffs, set at an average of 25% across all goods, are expected to raise costs for businesses and consumers alike, with Goldman Sachs economists predicting a potential 1.5% increase in U.S. inflation by year-end, as noted in a Financial Times analysis. China retaliated with a 34% tariff on U.S. goods, while the EU imposed duties on American exports like bourbon and Harley-Davidson motorcycles, according to the New York Times. Investors fled to safe-haven assets, driving up the yen and Swiss franc, while the CBOE Volatility Index (VIX) spiked to its highest level since 2022. Powell’s cautious stance has left markets anxious, with analysts from Yahoo! Finance suggesting that a prolonged trade war could tip the U.S. into recession by late 2025.

Fed Faces Dilemma as Jobs Report Surprises

A surprisingly robust U.S. jobs report for March, released on Thursday, showed 250,000 jobs added—well above the 180,000 expected—complicating the Federal Reserve’s response to the trade war, per a Wall Street Journal analysis. The unemployment rate held steady at 3.8%, and wage growth ticked up to 4.2% year-over-year, signaling a resilient labor market despite tariff-induced uncertainty. Fed Chair Jerome Powell, quoted in a Bloomberg recap of his April 5 remarks, emphasized a “wait-and-see” approach, noting that the strong data might delay rate cuts planned for June as the Fed balances growth against potential inflation from tariffs.

The New York Times reported that the jobs strength was driven by gains in healthcare and construction, though manufacturing saw a slight dip—a possible early sign of trade war effects. Financial Times economists warned that tariffs could erase these gains by mid-2025, with Goldman Sachs projecting a 0.5% GDP hit if the trade conflict persists. Yahoo! Finance noted that bond yields rose, with the 10-year Treasury hitting 4.1%, as investors reassessed the Fed’s next move. Powell’s cautious tone has left markets guessing, with some analysts predicting a hawkish shift if inflation spikes.

Oil Prices Tumble Amid Trade War Fears

Oil prices crashed below $70 a barrel on Friday, extending losses as the trade war stoked fears of reduced global demand, according to a Reuters commodities update. West Texas Intermediate (WTI) fell 8% over two days, the sharpest drop since early 2023, while Brent crude slid to $68.50, per Bloomberg data. U.S. oil service firms like Halliburton braced for a hit, with executives telling the Wall Street Journal that tariffs on imported steel and equipment could raise costs by 20%, even as demand weakens. ExxonMobil, however, bucked the trend, announcing a $10 billion investment in a new Texas refinery, betting on long-term domestic energy needs.

The New York Times reported that China’s retaliatory tariffs on U.S. oil exports could slash American shipments by 30%, further pressuring prices. Analysts from the Financial Times warned that a prolonged trade war might push oil below $60, threatening the profitability of shale producers. Meanwhile, Yahoo! Finance highlighted a silver lining: lower fuel costs could ease inflation pressures for consumers, though this benefit may be offset by higher goods prices due to tariffs. ExxonMobil’s move, while bold, has drawn skepticism from energy experts who see a global shift toward renewables accelerating.

Caterpillar Warns of Demand Slump

Caterpillar warned on Friday that the trade war could slash demand from China by 15%, sending its stock down 10%, per a Reuters earnings update. CEO Jim Umpleby told Bloomberg that retaliatory tariffs on U.S. machinery could cost the company $500 million in lost sales in 2025, while higher steel costs from U.S. tariffs add another $200 million burden. The company plans to shift some production to Illinois from Asia, but the Wall Street Journal noted this won’t be operational until late 2026, leaving Caterpillar exposed in the interim.

The Financial Times reported that rival Deere & Co. echoed similar concerns, with both firms seeing a 5% drop in construction equipment orders since the tariffs hit. The New York Times highlighted Caterpillar’s role as a bellwether for global manufacturing, with its woes signaling broader economic trouble. Yahoo! Finance analysts see a silver lining: domestic infrastructure spending could offset some losses if Congress passes a rumored $1 trillion bill. Still, near-term pain seems inevitable as the trade war bites.

Apple Halts Shipments Amid Tariff Chaos

Apple’s stock plunged 12% on Friday after the company announced it would halt shipments from its Chinese production hubs to reassess new tariff terms, per a Bloomberg report. With 30% tariffs on electronics imports, Apple’s reliance on China—where it assembles 90% of its iPhones—has become a liability, according to the Wall Street Journal. CEO Tim Cook told analysts the pause could delay product launches, including the iPhone 17 slated for September, while costs might rise by $10 billion in 2025. Bloomberg Intelligence analysts doubt Apple will pass these fully to consumers, predicting a 5% margin hit instead.

The Financial Times reported that Apple is accelerating plans to shift 20% of its production to India and Vietnam, though this transition could take 18 months. Reuters noted that rival Samsung, with more diversified manufacturing, gained 3% in stock value as investors saw it weathering the storm better. The New York Times quoted supply chain experts warning of potential shortages for the holiday season, while Yahoo! Finance highlighted Cook’s pledge to “minimize disruption.” Investors remain jittery, with Apple’s market cap shedding $300 billion in two days.

TikTok Deal on Hold as China Objects

A potential TikTok deal—rumored to involve a U.S. buyer like Oracle—stalled on Friday after China objected to new U.S. tariffs, per a Reuters exclusive. The Wall Street Journal reported that Beijing’s 34% tariff on U.S. goods hardened its stance, with officials demanding TikTok’s algorithm remain Chinese-owned. The app’s fate in the U.S., where it boasts 170 million users, hangs in limbo, with Bloomberg noting an estimated 50% chance of a ban by year-end. TikTok’s stock, indirectly tracked via ByteDance stock, took a hit.

The Financial Times reported that U.S. negotiators paused talks, fearing escalation could derail broader trade discussions. The New York Times highlighted creator backlash, with some influencers losing 20% of ad revenue amid uncertainty. Yahoo! Finance analysts see geopolitical tensions trumping business logic, with China’s retaliation signaling a prolonged standoff. TikTok’s U.S. future remains a high-stakes question mark.

Editor’s Chart of the Day

Major Earnings

Goldman Sachs (GS) - April 14, Before Market Open

Goldman Sachs reported robust 2024 performance with net revenues of $53.51 billion and net earnings of $14.28 billion. It holds the #1 spot in M&A advising and leads in equities, bolstered by its Asset & Wealth Management division managing $3.1 trillion. Durable revenue from consumer banking and wealth management makes up 70% of total revenues. The "One Goldman Sachs" strategy enhances client service integration across divisions. The new Capital Solutions Group aims to expand in private markets and credit. However, macroeconomic uncertainty and regulatory pressures could hinder future profitability. Investors should track the Capital Solutions Group’s progress and interest rate impacts.

American Express (AXP) - April 17, Before Market Open

American Express saw Q1 2024 net income rise 34% to $2.4 billion and EPS jump 39% to $3.33. Its closed-loop model, controlling both issuing and network operations, targets affluent customers with premium cards like Platinum. Analysts predict a Q2 2024 EPS of $3.23, slightly below Q1. Rising delinquencies signal potential credit risks. Competition from Visa and Mastercard could pressure market share. AXP’s resilience in past downturns is a strength, but consumer spending trends bear watching. Investors should focus on delinquency rates and premium cardholder retention.

Taiwan Semiconductor Manufacturing Company (TSM) - April 17, Before Market Open

TSMC projects Q1 2025 revenues of $25 billion to $25.8 billion, with gross margins of 57% to 59%. Its $38 billion to $42 billion 2025 capex targets 3nm and 2nm chip advancements. AI accelerator revenue, a mid-teens share in 2024, is set to double in 2025. It dominates advanced semiconductor production for clients like Nvidia and Apple. However, U.S.-China geopolitical tensions pose risks. The industry’s cyclical nature contributed to an 11.66% EPS drop over the past year. Investors should monitor fab expansions and AI demand updates.

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