US-China Trade War Escalates: Global Market Capitalization Loses $5 Trillion, Federal Reserve Prepares to Intervene

Taiwan • Business • 04/12 10:08
US-China Trade War Escalates: Global Market Capitalization Loses $5 Trillion, Federal Reserve Prepares to Intervene

In April 2025, President Trump of the United States imposed a 145% tariff on Chinese goods, to which China responded with a 125% retaliatory tariff, escalating the U.S.-China trade war. This move triggered global financial market turmoil within 10 trading days, evaporating over $5 trillion in stock market value, and leading to a sell-off in U.S. Treasury bonds and the dollar. Federal Reserve officials indicated they were ready to intervene to stabilize the market, with inflation expectations soaring to their highest since 1981. The dollar index fell below 100, hitting a three-year low, reshaping global capital market confidence and order.

Key Updates

04/12 14:39

Taiwan's Premier Su Tseng-chang announced measures against country of origin fraud and anti-dumping, and began trade talks with the United States.

On April 12, 2025, Premier Cho Jung-tai (卓榮泰) emphasized in Hsinchu City that Taiwan will initiate actions against country of origin laundering and dumping to prevent Chinese products from being illegally transshipped through Taiwan to the United States, ensuring that "Made in Taiwan" truly means "Made in Taiwan." The first round of tariff negotiations between Taiwan and the United States began on April 11, with Taiwan being among the first countries to negotiate, indicating that bilateral cooperation has reached a substantive phase. Cho Jung-tai stated that Taiwan will strengthen export controls to protect high-tech products and increase procurement from and investment in the U.S. to maintain trade balance.

04/12 14:39

The Trump administration announced a temporary tariff exemption for 20 categories of electronic products, including products made in China.

On April 11, 2025, the U.S. Customs and Border Protection, under the directive of President Trump, announced a temporary exemption for 20 categories of electronic products, including smartphones, laptops, and semiconductors, from the reciprocal tariff policies. This exemption applies to global imports, including those from China. The exemption took effect on April 5 and will last for at least 90 days, providing short-term relief to companies such as Apple, Nvidia, and TSMC, and helping U.S. consumers avoid the pressure of rising electronic product prices.

04/12 14:07

The US-China trade tensions escalate: Juneyao Airlines delays the delivery of Boeing 787s, Taiwanese semiconductor companies benefit from new rules

In April 2025, the trade war between the US and China escalated, with retaliatory tariffs impacting the aviation and semiconductor sectors. Due to increased tariffs by the US, China's Juneyao Airlines delayed receiving Boeing 787-9 aircraft. The China Semiconductor Industry Association adjusted the rules for determining the origin of integrated circuit products, affecting the import costs of American chips and putting pressure on American companies such as Intel. Taiwanese foundries like TSMC, whose production is based in Taiwan, avoided punitive tariffs and emerged as potential beneficiaries.

04/12 14:07

The United States Waives Tariffs on Electronic Products: Apple, Samsung, and TSMC Benefit, Leading to a Rise in U.S. and Taiwan Stock Markets

On April 11, 2025, the U.S. Customs and Border Protection announced that electronic products such as smartphones, computers, semiconductors, and their manufacturing equipment have been added to the exemption list, effective retroactively as of April 5. This move eased market concerns about rising prices. This benefits tech companies such as Apple, Samsung, and TSMC. Following the announcement, stock markets in both the U.S. and Taiwan rose. The market is now focused on TSMC's earnings call scheduled for April 17, anticipating insights on tariff policies, AI demand, and U.S. investments.

04/12 12:06

The US imposes a 145% tariff on Chinese products: CEO of an educational toy company in Illinois faces a $100 million tariff bill.

In April 2025, U.S. President Donald J. Trump announced a 145% tariff on Chinese imports, which shocked American importers and manufacturers. Rick Woldenberg, CEO of Learning Resources, an educational toy company based in Illinois, stated that the cost of tariffs would skyrocket from $2.3 million in 2024 to $102 million in 2025, calling this change "doomsday." This policy led to retaliatory tariffs from China, which had a widespread impact on various U.S. industries, such as agriculture and retail.

04/12 10:08

US-China Trade War Escalates: Global Market Capitalization Loses $5 Trillion, Federal Reserve Prepares to Intervene

In April 2025, President Trump of the United States imposed a 145% tariff on Chinese goods, to which China responded with a 125% retaliatory tariff, escalating the U.S.-China trade war. This move triggered global financial market turmoil within 10 trading days, evaporating over $5 trillion in stock market value, and leading to a sell-off in U.S. Treasury bonds and the dollar. Federal Reserve officials indicated they were ready to intervene to stabilize the market, with inflation expectations soaring to their highest since 1981. The dollar index fell below 100, hitting a three-year low, reshaping global capital market confidence and order.

04/12 10:08

China's New Semiconductor Rule: 125% Tariff on U.S.-Manufactured Chips; Texas Instruments and Intel Stocks Fall.

On April 11, 2025, the China Semiconductor Industry Association issued a notice stipulating that the origin of imported chips will be determined by where the wafers are fabricated, impacting the range of the 125% tariff on U.S.-made chips. This policy caused a drop in the stock prices of American companies like Texas Instruments and Intel, with Texas Instruments closing 6.8% lower and Intel 3.7% lower. The new regulation significantly impacts the global semiconductor supply chain and trade dynamics.

04/12 07:37

Trump's equal tariff policy may cause the iPhone 16 Pro price to soar to NT$80,000, and experts warn that the risk of a U.S. economic recession has risen to 45%.

President Trump's "reciprocal tariffs" policy imposes a 145% tariff on imports from China, which could lead to the price of the Apple iPhone 16 Pro skyrocketing to NT$80,000. This policy has already had an impact on global supply chains and consumer markets, leading financial institutions like JPMorgan to warn about the risk of a U.S. economic recession, estimating a 45% probability. This article examines the policy's impact and expert opinions, highlighting the potential effects of tariffs on the U.S. economy and the prices of consumer electronics.

04/12 07:37

US-China Chip Tariff Dispute Escalates: Imposition of High Tariffs by 2025 Causes Global Market Turmoil and Price Hikes

In April 2025, President Trump of the United States imposed a 145% tariff on chips imported from China, and China countered with a 125% tariff on chips from the United States, leading to upheaval in the global semiconductor market. The prices of Chinese chips skyrocketed, resulting in a wave of panic buying, and many distributors halted price quotations. China's new regulation regards the wafer fabrication site as the place of origin, affecting U.S. manufacturers such as Intel and forcing companies to reevaluate their supply chain arrangements.

04/12 06:39

Escalation in the US-China Trade War: US Imposes 145% Tariff on Chinese Goods, China Retaliates with a 125% Tariff, Global Markets in Turmoil

On April 12, 2025, the US-China trade war intensified, with the US imposing a total tariff rate of 145% on Chinese products, and China retaliating with a 125% rate. This led to disruptions in global supply chains and financial markets. Taiwanese manufacturers experienced a surge in orders, air freight space was fully booked, and the Taiwan stock market experienced significant volatility. The US temporarily suspended reciprocal tariffs for 90 days on 75 countries, with Taiwan included in the first round of negotiations, requiring only a 10% tariff rate, prompting Taiwanese electronics and semiconductor companies to speed up shipments.

Global Stock Market Value Has Evaporated by Over $5 Trillion

Since Trump announced a 145% tariff on Chinese goods on April 2, global stock markets have been in turmoil. According to the MSCI World Index, in just 10 trading days, the global stock market value has evaporated by over $5 trillion, marking the most severe market correction since the COVID-19 pandemic in 2020.

In the U.S. stock market, the Dow Jones Industrial Average once fell by more than 7%, the S&P 500 Index retreated 17% from its peak, and the VIX volatility index surged to 60, reaching this level for the first time since the 2008 financial crisis and the COVID-19 pandemic. Although Trump announced on April 9 a 90-day suspension of high tariffs for most countries, while maintaining high tariffs on China, market confidence has not shown a significant recovery.

Asian and European markets were similarly affected. Japan's Nikkei 225 Index fell 3.8%, South Korea's KOSPI Index dropped nearly 1%, Europe's STOXX 600 Index fell 0.3%, and Germany's DAX and France's CAC 40 fell 0.2% and 0.16%, respectively.

U.S. Treasury Bonds Sold Off, Yields Surge

Traditionally considered a safe-haven asset, U.S. Treasury bonds failed to act as a safe haven during this market turmoil and instead saw massive sell-offs. The 10-year Treasury yield surged 50 basis points within a week to 4.492%, marking the largest weekly increase since 2001. The 30-year Treasury yield rose to 4.873%, the most significant surge since 1987.

Market analysis suggests that this bond market turmoil may be related to three major factors: large-scale foreign capital withdrawal, a wave of basis trade unwinding by hedge funds, and shaken investor confidence in U.S. fiscal and monetary policy. Columbia Threadneedle strategists noted that the simultaneous sell-off of U.S. Treasuries and the dollar is a typical feature of emerging market assets, indicating that the safe-haven status of U.S. assets is being challenged.

Federal Reserve Stance: Ready to Stabilize the Market

In response to the market's severe volatility, Federal Reserve officials have been actively communicating. Boston Federal Reserve Bank President Susan Collins stated that the Fed is "absolutely ready" to use various tools to stabilize financial markets. She noted that higher tariffs would lead to slower economic growth and rising inflation, predicting that this year's inflation rate will be "well above" 3%.

New York Fed President John Williams warned that the uncertainty caused by tariff policies could push the inflation rate to 4%, the unemployment rate to 5%, and economic growth to below 1%. He emphasized that although current monetary policy remains "mildly restrictive," the Fed will closely monitor market liquidity and economic data.

Expectations for Fed intervention have risen. Futures markets indicate that investors are betting the Fed will start cutting rates as early as May, with up to five rate cuts possible throughout the year.

Inflation Expectations Surge, Consumer Confidence Plummets

According to the University of Michigan's April survey, the U.S. consumer confidence index plummeted from 57 in March to 50.8, the second-lowest level since 1952. One-year inflation expectations surged from 5% to 6.7%, the highest since 1981; five-year inflation expectations also rose to 4.4%, the highest since 1991.

These figures indicate a significant decline in consumer confidence regarding future economic prospects and price stability, further exacerbating market concerns about a recession.

Dollar Index Plummets, Safe-Haven Funds Shift to Other Currencies

The Dollar Index (DXY) fell 2.8% this week, reaching a three-year low. Investors turned to traditional safe-haven currencies such as the euro, yen, and Swiss franc. The euro against the dollar once rose to 1.1476, the highest since 2022; the yen and Swiss franc appreciated by 1.65% and 4%, respectively.

The trend of capital withdrawal from dollar assets is evident. According to a Bloomberg survey, 77% of investors expect the Dollar Index to decline further within the next month, marking the most bearish outlook since 2022.

References

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