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Stocks moved lower midday on Friday on a report that said the Trump administration is considering broadening tech sanctions on China. This comes after President Donald Trump said China has “totally violated” its trade agreement with the United States, sending another jolt to markets after a whiplash week of tariff developments.
The White House is mulling adding “licensing requirements on transactions with [Chinese] companies that are majority-owned by already-sanctioned firms,” according to Bloomberg.
The Dow was down 230 points, or 0.55%, Friday midday. The broader S&P 500 was down 0.95% and the tech-heavy Nasdaq Composite slid by 1.48%.
Stephen Miller, the White House deputy chief of staff for policy, told reporters on Friday that the Trump administration is preparing other trade actions to target China, according to Reuters.
“The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” the president posted on social media early Friday morning. “So much for being Mr. NICE GUY!”
While stocks were lower Friday, the overall reaction from markets was relatively muted. Wall Street has started to bet that if Trump makes a trade war threat, he will eventually back down. It’s what’s been called the ‘TACO’ trade — or ‘Trump Always Chickens Out’.
The president’s jab at China on Friday comes at the end of a week where the trade war has returned to the center of focus. Stocks had received a boost this week after the Court of International Trade late Wednesday blocked most of Trump’s tariffs on legal grounds, but that rally lost steam as traders bet the White House would aggressively appeal and pursue another legal strategy.
A federal appeals court on Thursday paused the CIT’s ruling to block Trump’s tariffs, leaving the president’s massive tariff agenda in limbo as the courts deliberate its legality.
“The stunning, head-spinning, mind-boggling trade fiasco will not be resolved quickly,” said Greg Valiere, chief US policy strategist at AGF Investments, in a note. “It probably will land in the Supreme Court — and even that may not settle the issue.”
Investors on Friday also digested fresh data that showed the Federal Reserve’s preferred inflation gauge cooled in April slightly more economists had expected, but also revealed a significant drop in consumer spending.
Trump has reignited his trade war in the past week, which has stirred up uncertainty in markets after Wall Street had begun to turn the page on tariff concerns. The S&P 500 has been steadily climbing out of an early April slump instigated by the president’s back-and-forth on his “reciprocal” tariffs.
Despite the recent fluctuations, investors who sold at the start of May missed out on a historically strong month for markets. The benchmark index is up more than 6% this month and is on track for its best month since 2023 and its best performance in May since 1990.
“Even though the stock market has staged a decisive rebound since the April lows, there is still plenty of uncertainty on tariffs, especially given the legal battle that is brewing over the ‘Liberation Day’ tariffs,” said Clark Bellin, president and chief investment officer at Bellwether Wealth.
The dollar gained on Friday. Yet the US dollar index, which measures the dollar’s strength against six major foreign currencies, is on track to end the month slightly in the red. It would be the dollar’s fifth month of decline in a row.
“We expect bouts of market volatility ahead as investors continue to navigate a range of market, economic and geopolitical risks,” said Ulrike Hoffmann-Burchardi, CIO of global equities at UBS Global Wealth Management, in a Thursday note.
The benchmark S&P 500 is up about 0.5% this year.
This is a developing story and will be updated.
