S&P 500 was cruising to fresh highs, and then the Trump-China spiral took over. US imposing 100% tariffs following Thursday‘s China moves, and these were not tame, even if XLK and even SMH didn‘t react at all the day earlier (just dojis).

The full background is that China imposed rare earths export controls, same for rare earths mining / recycling equipment Made in China, and even for products containing trace amounts thereof. Whether civilian or military applications, that‘s a modern life condition sine qua non – the wars of this century are chip wars – and China had imported no soybeans for the past two months. It was leaked to the US it had also wanted other countries not to export to the US.

US responded Friday with export controls on critical software – and 100% tariffs that will dampen US consumer appetite. Cyclicals have reacted appropriately, whether retailers or a broad range of discretionaries – the peak in consumer confidence (UoM peaked before 2024 was over) even if XLY continued higher till this autumn.

Thus till the closing bell, over $1.5T in equities value was erased, Treasuries rallied, and USD suffered a suffered a daily reversal. Who would bet on some weekend resolution? If not, what‘s next?

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