Investors are eyeing a stock market rebound after Friday\u2019s trade war flare-up sent the S&P 500 to its worst loss since April.<\/p>\n
On Sunday, President Donald Trump sought to calm nerves in a post on Truth Social<\/a>, following his announcement on Friday that he will impose\u00a0an additional 100% tariff on China<\/a>\u00a0and limit U.S. exports of software.\u00a0<\/p>\n \u201cDon\u2019t worry about China, it will all be fine!\u201d he wrote. \u201cHighly respected President Xi just had a bad moment. He doesn\u2019t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!\u201d<\/p>\n Meanwhile, Vice President JD Vance told Fox<\/a> News\u2019s\u00a0Sunday Morning Futures that the U.S. is willing to be reasonable if China is too, though he insisted Trump has the upper hand with \u201cfar more cards\u201d than Beijing holds.<\/p>\n The shift in tone contrasts with Trump\u2019s fiery rhetoric on Friday<\/a> as he lashed out at China for its new export controls on rare earths, which are critical inputs across a range of industries.<\/p>\n \u201cMarket participants appear to be leaning into the TACO trade once more, fueled not only by what we\u2019ve seen in the recent past, but also by conciliatory remarks over the weekend from both President Trump and Vice President Vance, suggesting that Friday\u2019s announcement of additional 100% tariffs on Chinese imports are likely to be little more than a negotiating tactic,\u201d Michael Brown, senior research strategist at Pepperstone, said in a note on Sunday.<\/p>\n Futures tied to the\u00a0Dow\u00a0Jones Industrial Average surged 382 points, or 0.84%. S&P 500 futures were up 1.27%, and\u00a0Nasdaq\u00a0futures jumped 1.79%.<\/p>\n The yield on the 10-year Treasury tumbled 8.9 basis points to 4.059%. The U.S. dollar was up 0.04% against the euro and up 0.48% against the yen. Gold climbed 1.43% to a new high of $4,057.50 per ounce. U.S. oil futures rose 1.29% to $59.66 a barrel, and Brent crude gained 1.32% to $63.56.<\/p>\n Trump had previously imposed 145% tariffs on China, then put them on hold to allow negotiations to play out. A similar pattern played out with other trade partners like the European Union, causing Wall Street to dismiss maximalist threats with the TACO (Trump always chickens out) trade<\/a>.<\/p>\n Brown said Trump\u2019s new China tariff, which would go into effect Nov. 1 and bring the overall level to 130%, appears to be another example of his \u201cescalate to de-escalate\u201d strategy.<\/p>\n \u201cAssuming that this is another \u2018TACO\u2019 situation, and some clarity on that front is obtained before too long, then this is likely to prove another dip in equities that should be viewed as a buying opportunity, with the path of least resistance continuing to lead higher, if in somewhat choppy fashion,\u201d he added. <\/p>\n At the same time, the Federal Reserve\u2019s shift back to rate cuts amid still-solid economic growth should continue to boost to the dollar, which will likely shrug off tariff threats, Brown predicted.<\/p>\n Similarly, market veteran Ed Yardeni, president of Yardeni Research, also sees the U.S. and China pulling back from the precipice.<\/p>\n \u201cIf neither side\u00a0were to blink,\u00a0the US and Chinese economies\u00a0would\u00a0lead the global economy into a deep recession,\u00a0if not a depression,\u201d he wrote in a note on Sunday.\u00a0\u201cBut we\u00a0expect that both sides will blink very soon given the extremely adverse consequences of a trade war between the\u00a0world\u2019s\u00a0two biggest economies.\u201d<\/p>\n For its part,\u00a0Beijing remained defiant<\/a>, with the commerce ministry saying Sunday that China doesn\u2019t want a tariff war but is also not afraid of one. It also said the export controls are not a ban on rare earth shipments but are a sovereign right.<\/p>\n But China\u2019s new rare earth export policy ups the ante<\/a> well beyond another tit-for-tat exchange in the trade war against the U.S.<\/p>\n Dean Ball, who served as a senior advisor in the White House Office of Science and Technology Policy earlier this year,\u00a0wrote on X<\/a>\u00a0on Saturday that the policy gives Beijing the power to \u201cforbid any country on Earth from participating in the modern economy.\u201d<\/p>\n Dali Yang, a political science professor at the University of Chicago, sounded a similar alarm in a post on Sunday<\/a>, saying the move marks a decisive moment that reveals what a China-led order might look like.<\/p>\n Looking beyond rare earths, it\u2019s one that leverages control over strategic materials and technologies to prop up global influence.<\/p>\n \u201cChina is effectively saying: \u2018We control the arteries of high-tech civilization.\u2019 The rest of the world now sees that message clearly\u2014and is scrambling to build new circulatory systems,\u201d Yang wrote. <\/p>\n