Wall Street Watches Disappointment Over US-China Trade Talks
Financial institutions on Wall Street show a measured response to the China trade deal outlines
In a typical Wall Street Wednesday, neither positive inflation data nor a US-China trade agreement brought the hoped-for boost. Instead, traders expressed dissatisfaction with the framework agreement reached by the world's economic heavyweights. The Dow Jones Index lingered at 42,866 points, while the S&P-500 and Nasdaq indices dipped by 0.3% and 0.5% respectively.
The agreement in London revived the May agreement from Geneva, but market analysts feared a flimsy framework that would just extend the Geneva agreement's brief life. Adding to the disappointment was China's reported intention to renew rare earth exports restrictions – supposedly limiting export licenses to six months according to industry insiders.
Moreover, President Trump clarified the agreement still requires his and Xi Jinping's signatures. Trump declared China would "deliver in advance" critical rare earths and magnets, then baffled with his statement, “We get 55 percent tariffs, China gets 10 percent.” These murky declarations added to the confusion rather than clarifying the situation. Richard Clarida, former Federal Reserve representative and current Pimco advisor, echoed sentiments that politics are driving the economy, not just in the US, but increasingly in other nations as well.
Politics & Trade Agreements
The sketchy outline of the agreement and the US Court of Appeals' upholding Trump’s reciprocal tariffs contributed to skepticism on Wall Street.
Bonds, Dollar & Tedious Math
On the bond market, the yield on 10-year US Treasury notes dropped 6 basis points to 4.42%. Lower-than-expected US consumer prices in May triggered rate cut speculation. Yields sank to daily lows, with strong demand at a $39 billion auction of 10-year notes, leaving traders impressed by US bonds' resilience yet again.
Rate cut fantasies and plummeting bond yields weakened the dollar, with the Dollar Index slipping 0.4% - the euro soared to a nearly weekly high. Gold price swelled 0.8% in tandem with yields, enjoying an additional windfall from the greenback's slump.
Tesla Gains, Elon Musk Recants
The Tesla stock surrendered substantial gains during the session, but managed a 0.1% inched-up close. Tesla CEO Elon Musk conceded his recent attacks on President Trump as "overboard," potentially easing concerns about potential retaliation from Trump against Musk's ventures, Tesla and SpaceX. Musk also announced Tesla's much-awaited robotaxi service set to launch on June 22.
Meta Platforms stocks plummeted by 1.2 percent as the company in advanced talks to invest around $14 billion in Scale AI and consider hiring the startup’s CEO to head AI development. Lockheed Martin shares plummeted 4.2 percent as US Air Force slashed its planned 2024 order of F-35 fighter jets.
GameStop, the video game retailer, reported a decline in sales for the quarter but still turned a profit. Shares of its "meme stock" dropped 5.4 percent. General Motors shares rose 1.9 percent as the automaker embarks on a $4 billion plan to ramp up US production and lower its tariff burden. First Solar shares escalated 2 percent post Jefferies upgrading it to "buy." Former and still influential Starbucks CEO Howard Schultz endorsed the coffee chain's turnaround plan, giving its shares a 4.4 percent boost.
Source: ntv.de, ino/DJ
Enrichment Insights
As of mid-2025, there is no comprehensive "US-China trade deal" in place that fundamentally alters the tariff or trade relationship established in prior years. Instead, both countries maintain ongoing and evolving tariff measures, some of which have escalated. US tariffs on steel and aluminum from all countries form 50%, Section 301 tariffs on a wide range of Chinese goods continue, and China's retaliatory tariffs (including steel, aluminum, tech, ag, and chemicals) persist. Rare earth exports remain unrestricted, but China can use them as a retaliatory measure in trade tensions. There's no new trade deal impacting rare earth exports or driving significant movements in Wall Street indices like the Dow Jones, S&P-500, or Nasdaq.
- The ongoing uncertainty regarding the US-China trade agreement has drawn attention from various sectors, including the community policy and business world, as market analysts assess the potential impact on employment and finance.
- In the broader context of general-news, the trade talks and ensuing potential agreements have broader implications on politics, potentially shaping the economic landscape not only in the US but also in other nations.
