The White House stated yesterday that in response to China's retaliatory measures, it will dramatically increase tariff rates on some Chinese imported goods from 145% to 245%. Additionally, Federal Reserve Chair Powell's speech at the Chicago Economic Club this morning, expressing deep concerns about tariff policies, has intensified investor panic about the US-China trade war, leading to a severe sell-off on Wall Street.
Powell: Significant Uncertainty in US Economic Outlook
Powell candidly admitted that ongoing adjustments in trade, immigration, fiscal, and regulatory policies have brought "enormous uncertainty" to the US economic outlook. He specifically pointed out that the currently announced tariff levels are "far higher than originally expected" and could potentially cause long-term economic damage.
Powell warned that tariffs have a dual effect of driving inflation and hindering economic growth, which would place the Federal Reserve in an extremely difficult position between "price stability" and "full employment". He described this as potentially creating challenges unseen in nearly fifty years, with the economy simultaneously facing slowing growth, rising unemployment, and accelerating inflation.
Regarding investors' most pressing interest rate concerns, Powell hinted that the Federal Reserve would adopt a more cautious approach. He stated that if tariffs' negative impacts materialize, the Fed will assess how far the economy is from its two primary policy goals (price stability and full employment) and the time needed to narrow the gap, in order to determine the most appropriate action.
During the Q&A session, he reiterated that the labor market remains resilient but acknowledged that achieving both inflation and employment goals might be challenging for the remainder of the year. Powell emphasized:
The best approach is to "stay put" until the actual economic impact of Trump's tariff policies can be clearly assessed.
These remarks essentially dampened market expectations of near-term rate cuts and reflected how trade policy uncertainty constrains monetary policy.
Regarding interest rates, he noted they currently remain in the 4.25% to 4.5% range, which is essentially "moderately restrictive", and the Fed needs more time to observe. He said, "We currently have sufficient space to wait for clearer circumstances before considering adjusting our policy stance," suggesting no imminent action.
Market Panic Spreads, Tech Giants Plummet
While Powell released a hawkish signal, chip leader Nvidia had earlier confirmed receiving a government notification that future exports of its downgraded H20 to China and certain specific countries would require prior export permits. The company's Q1 financial report will recognize a $5.5 billion expense related to H20 chip inventory and cancellations, causing Nvidia (NVDA) to plummet 6.87%.
Taiwan Stock ADRs were not spared, with TSMC ADR falling 3.6%, and UMC and ASE ADRs also declining. Wall Street's performance on the 16th was poor:
- Dow Jones Industrial Average dropped 699.57 points, a 1.73% decline, closing at 39,669.39
- S&P 500 fell 120.93 points, a 2.24% decline, closing at 5,275.70
- Nasdaq plummeted 516.01 points, a 3.07% decline, closing at 16,307.16
- Philadelphia Semiconductor Index was hit hardest, dropping 164.73 points, or 4.10%, closing at 3,857.17
Bitcoin Approaches $83,000
While traditional financial markets were turbulent, the cryptocurrency market performed relatively independently. Although it briefly dropped after Powell's speech, it has since recovered above $84,000, currently trading at $84,127, up 1.02% in the past 24 hours.
- ETH currently at $1,583 / -0.23%
- XRP at $2.08 / -0.10%
- BNB at $583.53 / +0.88%
- Solana (SOL) at $131.34 / +3.94%
Overall, the cryptocurrency market has not fully followed the US stock market's sharp decline, but market sentiment remains cautious, and investors should monitor potential impacts from expanding economic risks.
