The Dow Jones Industrial Average (DJIA) found a near-term foothold to wrap up the trading week, rebounding around 300 points from recent lows and fighting to stay on the high side of key moving averages. Equities took a hit this week after multiple entities in the lending and banking sectors went bankrupt or flashed warnings about debt quality, sparking a brief period of wobbly sentiment. Investors recovered their footing to end the week.
Friday rebound takes Dow back from the brink
Friday’s equity market recovery was partly driven by hope of an easing in trade tensions after US President Donald Trump soft-balled the idea that his administration could eventually explore reducing tariffs on China. The Trump administration continues to appear more apprehensive about following through on its own threats to ramp up retaliatory tariffs on China, and investors are continuing to bank on a protracted cooling period in sweeping tariffs threatened or imposed by the Trump administration throughout 2025.
After a brief spat of angry social media posts and pulling out of planned sideline talks with China’s President Xi Jinping, President Trump has dragged himself back to the negotiating table. Fresh trade talks between Donald Trump and Xi Jinping are now expected in the coming weeks, along with meetings between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.
The US government shutdown continues to roll onward with little sign of a quick resolution. Official datasets remain suspended or delayed, but this can only be good news for markets that remain hinged largely on impending interest rate cuts from the Federal Reserve (Fed). With official data running dark amid a federal funding freeze, Fed officials will have very limited access to data that could knock the US central bank off its path toward two quarter-point interest rate cuts before the end of the year.
Dow Jones daily chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
