Stock market plunges 200 points due to Fed's cautious stance and President Trump's intensified threats against China
U.S. Stock Markets Fall on Trade Tension, Despite Positive Inflation Figures
In the wake of positive inflation data on Friday, May 30, U.S. stock markets experienced a significant decline. The Dow Jones Industrial Average fell 240 points, or 0.57%. The S&P 500 dropped 60 points, or 1.00%, while the tech-heavy Nasdaq Composite slid 307 points, or 1.60%.
The negative sentiment in the financial markets stems from renewed trade tensions, as President Donald Trump threatened China over its trade policy. Trump accused China of violating its agreement with the U.S., which had paused the upcoming 145% tariffs on Chinese imports. However, specific details about China's alleged violation have yet to be provided.
"The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!" Trump wrote on Twitter.
The ongoing uncertainty surrounding the trade policy has been a concern since April 2, when Trump announced unprecedented tariffs on major U.S. trading partners. Despite a federal court's decision to strike down Trump's tariffs on May 29, the lingering uncertainty is contributing to a stock market pullback.
Economists have also noted an impact on Federal Reserve policy due to the tariffs. According to a Morgan Stanley analyst, tariffs are likely to have an inflationary effect in the U.S., with the Fed expected to maintain current interest rates, despite a positive inflation reading.
In April, core inflation rose 2.5%, marking its highest reading since 2021. This is the metric the Fed prefers to examine when setting monetary policy. Although the tariffs have yet to demonstrate a measurable inflationary effect, most experts anticipate this will occur in the future.
Chair Jerome Powell has remained resistant to White House pressure to lower interest rates since April, when tariffs became effective.
Regarding Bitcoin's role in the U.S.-China trade wars, experts highlight its potential as a tool for circumventing traditional financial systems, although it is not central to the trade dispute. Both countries are working to regulate cryptocurrencies to maintain financial stability and prevent illicit use, which could impact how Bitcoin is used in trade. This evolving dynamic adds a complex layer to the broader economic and technological competition between the two global powers.
- In the context of the U.S.-China trade tensions, Bitcoin, as a cryptocurrency, could potentially serve as a tool for bypassing traditional financial systems, although it is not the primary focus of the trade dispute.
- The ongoing trade conflict between the U.S. and China, despite the positive inflation figures and court rulings on tariffs, continues to influence the stock market, with the Dow, S&P 500, and Nasdaq experiencing declines.
- The Federal Reserve's monetary policy is expected to be influenced by the tariffs, with experts predicting an inflationary effect and the Fed maintaining current interest rates.
- Both the U.S. and China are working on regulating Initial Coin Offerings (ICOs) and Decentralized Exchanges (DEXs) to maintain financial stability and prevent illicit use, which could influence how these crypto finance tools are integrated into the general-news dominated by business and politics.
