Trump’s Tariff U-Turn Sparks Market Rally, but Uncertainty Looms Large

Global financial markets are bracing for volatility as U.S. President Donald Trump’s abrupt decision to delay a threatened 50% tariff on European Union imports sparks a temporary rally.

On May 27, 2025, FTSE futures surged 0.94% in Asia, and S&P 500 futures climbed 1.11%, signaling a strong Wall Street open after a U.S. holiday closure.

However, Asian markets, including Japan’s Nikkei (-0.15%) and China’s CSI300 (-0.56%), retreated, reflecting persistent investor caution.

Trump’s policy reversal, extending trade talks until July 9, underscores the unpredictability of his trade strategy, eroding confidence in the U.S. economy.

The U.S. dollar, near a one-month low, is poised for a fifth consecutive monthly decline, its longest losing streak since 2017.

Markets are anticipating Nvidia's earnings and crucial U.S. economic data, while tariff uncertainty and inflationary pressures continue to cloud the global outlook.

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Tariff Flip-Flops Rattle Investor Confidence

Trump’s erratic trade policies continue to unsettle markets. After threatening a 50% tariff on EU imports, he backtracked, maintaining a 10% reciprocal tariff rate and extending negotiations, a move that briefly lifted European and U.S. futures.

But according to real-time data, the MSCI Asia-Pacific index (excluding Japan) fell 0.17%, indicating that global markets are still uneasy.

The World Trade Organization recently slashed its 2025 global trade growth forecast from 2.7% to a 0.2% decline, citing Trump’s tariffs as a major drag.

Investors are also grappling with broader economic concerns, as U.S. retail sales rose 1.4% in March, driven by pre-tariff stockpiling, which could exacerbate inflation.

Federal Reserve Chair Jerome Powell has warned that these tariffs create a “challenging scenario” for monetary policy, potentially forcing higher interest rates to curb price pressures.

Did You Know?
The U.S. imposed tariffs on $2.3 trillion of goods imports in 2024, affecting 71% of total U.S. goods imports, the largest trade restriction since the 1930 Smoot-Hawley Act.

Nvidia Earnings and Fed Data in Focus

Attention is turning to Nvidia’s first-quarter earnings on May 28, with analysts expecting a 65.9% revenue jump despite new U.S. export restrictions on AI chip sales to China.

Nvidia plans to launch a lower-cost AI chipset for China by June, aiming to mitigate losses from a $2 billion hit to its China revenue, which accounts for 16.9% of its total sales.

Meanwhile, Friday’s U.S. core personal consumption expenditures (PCE) index, expected to show a 2.8% annual increase, will offer important information regarding the Federal Reserve’s rate outlook.

Recent market sentiment suggests investors are bracing for sticky inflation, with U.S. 10-year Treasury yields easing to 4.28% from 4.48% last week.

A Bank of Japan conference in Tokyo, starting May 27, is also drawing focus, with global central bankers discussing slowing growth and persistent inflation, adding to the cautious market mood.

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What Lies Ahead?

The temporary tariff reprieve offers markets breathing room, but Trump’s unpredictable policy shifts continue to undermine long-term planning for businesses and investors.

Companies like Apple, facing a $900 million tariff-related headwind, and Walmart, warning of potential price hikes, highlight the real-world impact of the trade war.

If negotiations with the EU falter, the reimposition of higher tariffs could trigger retaliatory measures, further disrupting global supply chains.

Currently, markets are experiencing cautious optimism, but the impending Nvidia earnings and PCE data could either stabilize or intensify volatility.

Investors must navigate a high-stakes economic landscape as global trade patterns shift and inflation risks rise.