Global sentiment shaken amid intensifying trade war

Financial markets are once again on edge as geopolitical friction intensifies between the United States and China, particularly over chip exports and strategic resources. Risk sentiment weakened following new US restrictions on Nvidia chip shipments and the announcement of a fresh investigation into tariffs on critical minerals. These developments reignited fears of a prolonged trade standoff with sweeping global consequences.

Market reaction: Stocks slide, gold soars

US and European equity futures declined sharply in early trading after the Trump administration imposed tighter restrictions on Nvidia’s exports to China. This reignited concerns over the tech war between the world’s two largest economies. The announcement coincided with ASML’s weak order book, triggering a widespread selloff in the semiconductor sector.

• S&P 500 futures fell by 1.4%
• Nasdaq 100 futures dropped 2.2%
• Hang Seng Index declined 2.4%
• MSCI Asia Pacific slipped 1.2%
• Gold surged to an all-time high above $3,290 an ounce as investors sought refuge in safe-haven assets
• Swiss franc and Japanese yen strengthened against the dollar

The Bloomberg Dollar Index fell 0.5%, reflecting broader uncertainty about the US’s trade direction.

China: Strong Q1 GDP undermined by tariff fallout

China reported first-quarter GDP growth of 5.4%, exceeding expectations. Industrial output and retail sales both posted notable increases in March, suggesting strong underlying momentum before the latest round of tariffs.

• Industrial output rose 7.7%
• Retail sales grew 5.9%
• Fixed asset investment increased 4.2%
• Unemployment declined to 5.2%

However, the upbeat data was quickly overshadowed by rising concerns about future export activity. New US levies — now as high as 145% on most Chinese goods — are expected to heavily dent shipments and weigh on GDP in the coming quarters. Beijing is facing mounting calls to launch a comprehensive stimulus package, though policymakers may delay action until signs of deterioration become clearer.

China signals conditional willingness for talks

Amid rising tensions, China has indicated that it would be open to trade negotiations — but only under strict preconditions. These include:

• A show of respect from the US administration, particularly by curbing hostile rhetoric
• A more coherent and consistent US position
• A commitment to addressing China’s concerns over Taiwan and sanctions
• The appointment of a US point person empowered to negotiate a meaningful agreement

Beijing remains politically aligned against any perceived humiliation and has warned that further provocation could derail the path to diplomacy. The recent ban on Nvidia’s H20 chips is seen as an escalation that undermines goodwill efforts.

Trump administration escalates with minerals tariff probe

In another move heightening the trade conflict, President Trump signed an executive order launching a Section 232 investigation into the impact of critical mineral imports on national security. The probe covers a broad array of materials including rare earth elements, lithium, nickel, and uranium.

The administration argues that US reliance on foreign sources, particularly from China, poses a strategic risk. If the investigation concludes that these imports threaten national security, it could pave the way for sweeping new tariffs — further complicating already strained supply chains.

This latest action follows prior investigations into semiconductors and pharmaceuticals and underscores a broader strategy aimed at reducing foreign dependence and bolstering domestic production. However, the market remains concerned that expanding tariff use could amplify global inflationary pressures and disrupt international trade flows.

UK inflation offers temporary relief

UK inflation cooled for a second consecutive month, with consumer prices rising 2.6% in March — below both the previous month’s figure and market expectations. The slowdown was largely driven by lower fuel prices and flat food costs, while services inflation eased to 4.7%.

However, this moderation may prove short-lived. A surge in household bills, including council tax and energy prices, is expected to add significant upward pressure in the coming months. Despite the softer print, the economic environment remains highly sensitive to global trade developments, particularly the Trump administration’s tariff escalation.

Markets have begun pricing in the possibility of a Bank of England rate cut as early as May 8, with traders expecting that tightening financial conditions and weakening global demand may force the central bank to act preemptively.

Uncertainty deepens across all fronts

Global investors are navigating a treacherous landscape shaped by aggressive trade policies, weakening growth expectations, and renewed geopolitical friction. While some economic data — notably from China and the UK — offer glimmers of stability, they have been rapidly overshadowed by policy shifts that are injecting fresh volatility into markets.

Until there is a clear breakthrough in US-China negotiations or clarity on the Fed’s policy path, markets are likely to remain defensive. For now, risk management and flexibility remain paramount.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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