Last week’s major geopolitical highlight wasn’t the ceasefire deal between Israel and Hamas, but rather the escalating trade war between the U.S. and China. Although it did not cause the S&P 500 and Nasdaq indices to collapse, cryptocurrencies, including Bitcoin and Ethereum prices, did suffer a sharp decline.

To recap: on Thursday, China announced new licensing requirements for exporting rare-earth technologies, materials critical not only for car manufacturing, but also for computer chips and even military hardware, including tanks. The new rules apply to both domestic and foreign companies using Chinese technologies.

The following day, Beijing doubled down by imposing high port fees on U.S. vessels entering Chinese ports. It also launched an antitrust investigation into Qualcomm, targeting its acquisition of connected car chipmaker Autotalks. In response, President Trump announced an additional 100% tariff on all Chinese imports.

As for China’s sudden escalation, it might have been a move to gain leverage ahead of the country’s leader meeting with U.S. President Donald Trump in South Korea later this month, where trade tensions are expected to take center stage. But it now seems Beijing may have pushed things a bit too far.

Will we see another “TACO Trade”?

There is certainly hope, especially after both sides softened their rhetoric over the weekend, moving from confrontation to dialogue. The markets seemed to pick up on that optimism, with US futures opening higher on Monday and cryptocurrencies beginning to recover some of their recent losses.

But it’s worth noting that China doesn’t seem too concerned about the worst-case scenario, probably because it has become less dependent on the US market. To put this into context, September data shows that China’s exports rose 8.3% year-on-year, even though shipments to the US fell 27%.

Therefore, it is too early to talk about a truce. Investors must be mentally prepared and in their portfolios for another rise in volatility.

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Some portions of this content may have been generated or assisted by artificial intelligence (AI) tools and been reviewed for accuracy and quality by our editorial team.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
Some portions of this content may have been generated or assisted by artificial intelligence (AI) tools and been reviewed for accuracy and quality by our editorial team.