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Trumped Waved the White Flag

Amid the turmoil, Treasury Secretary Scott Bessent convinced Trump to do a 90-day pause.

The stock and bond markets instantly reversed and the Dow shot up nearly 3,000 points, about 7.8 percent. The Nasdaq rose 1,857 points up 12.2 percent, and the S&P 500 rose 474 points up 9.5 percent.

Who did Trump or Treasury Secretary Bessent tell?

Shorts Covered What Now?

The market, at least for now is thinking a bit more clearly so far today, but nothing today would surprise me.

This is an IF but not an unlikely one, IF yesterday’s rally cleared out most of the shorts, there is nothing but a huge air pocket below.

Stock Selloff Accelerates as China Trade War Sinks In

After a brief hiatus from reality, Stock Selloff Accelerates as China Trade War Sinks In

U.S. stocks opened lower Thursday and declined sharply heading into midday, as investors sort through a global economic outlook that has improved drastically over 24 hours but remains uncertain.

Bank stocks and tech shares were hit hard, retracing some of Wednesday’s epic gains. Wall Street’s fear gauge, the CBOE Volatility Index, was rising though far below levels of earlier this week. Nasdaq, which posted its biggest gain since 2008 on Wednesday, gave half of it back Thursday, declining 5%.

Trump’s reciprocal tariffs on nearly 100 nations took effect Wednesday. Later, as he paused the levies on other nations, Trump said he had raised China’s import tax to 125%.

In return, China said Thursday it would reduce imports of American movies, another bid to strike at U.S. services exports in an escalating trade war between the two countries.

Goldman Sachs cut its growth outlook for China, citing the impact of tariffs. The bank now projects China’s economy will expand 4% this year and 3.5% in 2026.

Trump Tariffs on China Actually 145%, Says White House

The tariffs imposed on China by President Trump in his second term add up to 145%, the White House said on Thursday—not 125%, as it previously indicated.

The 125% tariff that President Trump announced on Wednesday afternoon referred only to reciprocal tariff levels, a White House official said, and did not take into account the 20% tariffs Trump had previously levied on China over its role in the fentanyl trade.

When the fentanyl-based tariffs are added, the second-term tariffs are 145%, which are also stacked on top of product-specific tariffs on China that Trump imposed in his first term and then-President Joe Biden expanded.

As I have commented before, these are now meaningless numbers. Above 100 percent most trade will stop. Another 5,000 percent won’t do anything.

However, the “Made in Vietnam” trade is back on. Look for goods from China to filter though as coming from Vietnam.

This tariff avoidance scheme was in play in Trump’s first administration as well.

Trade Deficit with China is Understated

For an explanation of tariff avoidance via Vietnam please see my January 18, 2025 post The US Trade Deficit with China is Understated by as Much as 30 Percent

Normal trade math does not add up. US imports and China exports are not in sync.

According to Brad Setser, Chinese exports started exceeding US imports only in those categories with tariffs, and only after the tariffs were imposed.

I commented “This appears to be an amusing case of China cleverly avoiding US tariffs but not clever enough to hide it better.“

This appears to be an amusing case of China cleverly avoiding US tariffs but not clever enough to hide it better.

I was wrong about one thing. I did not think Trump would really be stupid enough to break USMCA.

Excluding Oil, the US Has a Trade Surplus with Canada Every Year Since 2008

For more on Canada, please see see Excluding Oil, the US Has a Trade Surplus with Canada Every Year Since 2008

Let’s do a fact check on Trump’s Canada claims.

Finally, Please read over and over Cheese Was a “Key Achievement” of Trump’s USMCA Trade Agreement

The above post contains over a dozen instances in which Trump bragged what a great deal.

It was such a great deal that Trump thanked Mexico and Canada. Notably USMCA is “Good for everybody – Farmers, Manufacturers, Energy, Unions – tremendous support. Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!”

More By This Author:

Three Things That Spooked The Bond Market And Why Trump Blinked
Trump Capitulates With A 90-Day Pause On Tariffs, Dow Jumps 2,200 Points
China Retaliates With 84% Tariffs On The U.S., Most Trade Will Stop