Global stock markets have gone back to being under pressure following a short-lived one day reprieve, with the re-escalation of U.S-China trade tensions overnight.
Stock futures crashed on the Tuesday morning, October 14, in another escalation of retaliation by Beijing, pulling down the high-fliers in the AI and tech sector that had previously led this year’s rally.
This is a retraction to Monday, October 13, when Trump made waves in his Truth Social account, minimizing the issue of trade. However, optimism among investors did not last long, and within no time, Beijing stoked the trade war by pointing to South Korean conglomerate Hanwha Ocean, the subsidiaries of which are based in the United States.
The Chinese government declared on Tuesday, October 14, that it would sanction five American subsidiaries of Hanwha Ocean in South Korea, which will virtually prohibit Chinese individuals and businesses from dealing with them.
The Ministry of Commerce mentioned the issue of national security and accused the subsidiaries of aiding U.S. military and strategic activities that are a threat to Chinese business interests.
This follows only a few days on the heels of Trump making the unexpected announcement that his administration would impose a 100 per cent tariff on all Chinese imports as of November 1st, which reignites the fear of putting out the world into a full-scale economic cold war between the two largest economies in the world.
The renewed selling pressure was led by major technology and AI names that have driven the 2025 bull market:
These stocks are now more sensitive to trade headlines and particularly China related trade news since they are exposed to world supply chains and are overly dependent on international sales.
“These names are the tip of the spear when it comes to trade risks,” said Emily Porter, Senior Technology Analyst at Wellspring Securities.
“Investors are de-risking portfolios, and the first to go are high-momentum tech stocks,” she added.
The flare-up in trade tensions follows a turbulent few days for financial markets. On Friday, stocks plummeted in response to Trump’s tariff threat.
The Dow lost more than 800 points, and the S&P 500 recorded its biggest one-day drop since April 10. Although markets rebounded strongly on Monday, buoyed by Trump’s attempt to calm investors, the new Chinese sanctions quickly reversed that optimism.
“Trade policy remains a key driver for U.S. financial markets this year, and last week saw a sharp re-escalation in tensions between the U.S. and China,” said Ulrike Hoffmann-Burchardi, Global Head of Equities at UBS Global Wealth Management. “We expect increased equity market volatility into the end of the month.”
She noted that past trade conflicts between Trump and Chinese President Xi Jinping often cycled through escalations followed by temporary truces, with critical sectors such as rare earth minerals, tech hardware, and shipping fees frequently used as bargaining chips.
The trade conflict had ripple effects across global markets:
In commodities:
Meanwhile, the 10-year U.S. Treasury yield fell to 4.02%, signaling increased demand for low-risk assets.
With more than 35 S&P 500 companies reporting this week, earnings season may offer temporary relief. Geopolitical risks are, however, evidently taking a lead over market sentiment.
The remarks of President Trump indicate that there is a possibility of additional escalation or sudden de-escalation is still in the cards.
Traders and analysts are preparing to experience greater volatility as the November 1st date that the new Trump tariffs are bound to become effective approaches.
“The market is being whiplashed by every statement and counter-statement between Washington and Beijing,” said Daniel Cho, Chief Market Strategist at Ridgeview Capital.
“Until there’s clarity or a ceasefire, this volatility is here to stay,” he added.