US President Donald Trump has paused his reciprocal tariffs on Chinese imports for 90 days, sending European markets soaring in response. However, the reprieve may be short-lived as traders weigh up the ongoing uncertainty and potential risks to global trade.
The Nasdaq’s $4 trillion gain in market cap suggests a positive mood among markets, but experts warn that this is largely due to Trump’s abandonment of his tariff policies. European exporters still face significant challenges, including a 10% global tariff and 25% applied to automotive sales.
China remains the central focus of Trump’s trade war, with tariffs on imports reaching historic highs at 125%. This could lead to a spike in US inflation over coming months, as 14% of all US imports come from China. The US CPI report will closely monitor signs of price pressures.
Meanwhile, commodity markets exhibit divergent trends, with gold pushing higher and oil losing value due to concerns over global demand. Trump’s decision is also linked to rising bond yields, which highlight the dumping of US treasuries as a tool in the ongoing trade war.
Despite this, investors remain cautious, and recession odds have eased but not disappeared. The impact of the trade war on the economy is still uncertain, leaving markets vulnerable to further fluctuations.
Source: https://www.fxstreet.com/analysis/will-chinese-tariffs-spark-inflation-surge-202504100925