The turmoil in the financial markets due to the trade war continues unabated as of Wednesday morning (April 9, 2025). The reciprocal policy introduced by U.S. President Donald Trump takes effect today local time.
Several countries affected by the reciprocal tariffs, such as South Korea and Japan, are reportedly beginning discussions with the U.S., with Trump suggesting that a favorable agreement could be reached.
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This announcement initially propelled U.S. stock indices like the Nasdaq upward by 726 points, while Gold surged over $40 or 400 pips. However, shortly thereafter, the Nasdaq experienced a dramatic drop of 402 points, concluding Tuesday’s trading at 17,226, while Gold stabilized at $2,981 per troy ounce.
This morning, the Nasdaq further slipped to 16,876, and Gold fell to $2,969 per troy ounce. The reversal in Nasdaq and Gold prices came after Trump reiterated plans to increase import tariffs from China to 104%. This decision followed China’s announcement last Friday to hike tariffs on all American products by 34%, effective April 10.
The trade war between the two countries is likely to escalate, as China shows no signs of backing down. Bloomberg reported comments from a Chinese Ministry of Foreign Affairs official stating there is no fear in the face of challenges, emphasizing that intimidation, threats, and coercion are not appropriate methods of engaging with China.
The decline in the Nasdaq and the drop in Gold prices amid the intensifying trade war suggest a correlated movement. The falling stock index has led many investors to liquidate their buy positions in Gold to realize profits and offset losses in the stock market.
Consequently, Gold has also been pulled down along with the Nasdaq and other stock indices, despite the fact that trade wars typically create a positive sentiment for Gold. Furthermore, China’s central bank has reported continued purchases of Gold for its foreign exchange reserves in March, indicating that central banks around the world are still accumulating Gold despite high prices.
