US stock markets have experienced an upsurge following US President Donald Trump’s announcement of a temporary 90-day suspension of certain tariffs. However, in a surprising move, he plans to raise China’s tariff rate to 125% in response to their counter-tariffs against the US.
President Trump’s proposal, outlined in an April 9 post on Truth Social, indicates a decrease in the tariff rate to 10% for countries that refrain from retaliatory tariffs during the 90-day grace period. Furthermore, he expressed hope that China would recognize that exploiting the US and other nations is not sustainable or acceptable.
The S&P 500 index saw a nearly 7% rally in response to these announcements. Data sourced from TradingView highlights the extreme volatility of capital markets against the backdrop of macroeconomic unpredictability, intensified by the potential for a lasting trade dispute.
Since President Trump’s announcements, extreme volatility has become a staple in capital markets. The stock market has fluctuated dramatically, erasing trillions of dollars in shareholder value in days following the imposition of these reciprocal tariffs. Nevertheless, the market tends to recover with every tariff halt or moderation in Trump’s stance. On April 7, speculation about a possible suspension of tariffs triggered a rally in the US stock market, earning it $2 trillion in value.
The Volatility S&P 500 index (VIX), a measure of the market’s volatility, peaked at over 60 on April 7 – the highest it has been since the yen carry trade unwound in August 2024. Despite the substantial drop in the last two days, the current VIX reading of 37.5 still indicates an exceptionally volatile market.
Arthur Hayes, BitMEX’s founder and a market analyst, recently expressed that a devaluation of the Chinese yuan in reaction to Trump’s trade tariffs could instigate a capital migration into cryptocurrency. Hayes referenced past instances, specifically in 2013 and 2015, when Chinese investors transferred capital from conventional investments to digital assets following devaluations of the yuan.