U.S. Stocks Fall as Trump Slams China; Markets Brace for PCE Data and Tariff Uncertainty
U.S. equity markets moved lower on Friday after President Donald Trump accused China of breaching a recent trade agreement, escalating tensions between the world’s two largest economies.
As of 09:40 ET (13:40 GMT):
- The Dow Jones Industrial Average declined by 85 points, or 0.2%
- The S&P 500 dropped 22 points, or 0.4%
- The NASDAQ Composite lost 120 points, or 0.6%
Despite the drop, major indexes remain poised to post solid gains for May, rebounding from steep losses seen in April when Trump launched a sweeping new tariff regime.
Trump Targets China, Again
In a Truth Social post on Friday, Trump accused Beijing of violating a recent trade truce, stating, “China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!”
While Trump didn’t specify which part of the agreement had been broken, the statement followed remarks from Treasury Secretary Scott Bessent, who acknowledged that talks had stalled and suggested a direct conversation between Trump and Chinese President Xi Jinping might be necessary to make progress.
Earlier this month, the U.S. and China had agreed to scale back tariffs, with the U.S. slashing duties on Chinese goods from 145% to 30%, and China reducing retaliatory tariffs from 125% to 10%. The deal also included a 90-day pause on further tariff hikes.
Appeals Court Reinstates Tariffs, Adding to Market Caution
Markets had already been on edge following an appeals court ruling that temporarily upheld Trump’s tariff policy, just a day after a lower trade court ordered him to halt the measures.
The initial ruling had raised hopes that the tariff agenda would be curtailed, potentially reducing economic disruption. But the appeals court decision dampened optimism, with the next hearing now scheduled for June 5, creating more policy and economic uncertainty.
Inflation Data Offers Fed Some Breathing Room
Friday’s release of the April personal consumption expenditures (PCE) price index, a key inflation gauge for the Federal Reserve, showed signs of easing inflationary pressure.
- The headline PCE rose 2.1% year-over-year, the lowest reading since February 2021
- The core PCE, which excludes food and energy, rose 2.5%, slightly below February’s 2.6%
The data could give the Fed more leeway to ease monetary policy, especially as economic growth remains fragile. Revised GDP data on Thursday showed the U.S. economy contracted by 0.2% in Q1, underscoring the potential impact of Trump’s volatile trade policies.
Mixed Earnings and Tariff Impacts Hit Retail Stocks
Several companies reported earnings Friday, with tariff exposure playing a key role in performance:
- Gap Inc. (NYSE:GAP) shares dropped after the retailer posted strong quarterly results but warned tariffs could cost between $100 million and $150 million, even after mitigation.
- Ulta Beauty (NASDAQ:ULTA) surged after raising its full-year outlook and beating Q1 expectations, reflecting continued demand for discretionary beauty products.
- Dell Technologies (NYSE:DELL) rose despite mixed Q1 results, as the company raised full-year guidance. Tariff-related demand issues were cited as a factor behind the earnings miss.
- American Eagle Outfitters (NYSE:AEO) slumped after projecting Q2 revenue below estimates and posting a wider-than-expected loss, blaming rising input costs and soft consumer demand.
Crude Prices Set for Weekly Drop Amid Tariff Worries and OPEC+ Expectations
Oil prices slipped Friday, heading for a second straight week of losses as traders remained cautious ahead of a key OPEC+ meeting and weighed the potential impact of U.S. trade policy.
As of 09:40 ET:
- Brent crude edged up 1% to $62.71 per barrel
- West Texas Intermediate (WTI) fell 0.7% to $60.50 per barrel
Both benchmarks were set to end the week down more than 2%, extending a broader slide that began after Trump’s “Liberation Day” tariff announcement on April 2, which has so far triggered over a 10% drop in oil prices.
The OPEC+ group is scheduled to meet Saturday, with expectations high that members will agree to a third consecutive output increase, potentially adding another 411,000 barrels per day in July.
