By Ben Norris, CFA, Senior Investment Strategist, Vice President
There have been no trade negotiations between the United States and China since the Trump administration raised tariffs on “Liberation Day” on April 2. Or at least that’s what the Chinese government and President Xi Jinping said last week following assertions from Trump and his team that trade talks had begun. In interviews last week, Trump indicated that the White House and Beijing had begun working on a deal, and that President Xi Jinping had called him personally. Trump’s statements came after he acknowledged that he would like to lower the “very high” 145% tariff on China if it engages in trade talks. “It will come down substantially,” he said. However, shortly after Trump’s optimistic outlook sent stocks higher, Beijing released its own statement denying that any talks had taken place. “The U.S. should stop creating confusion,” the statement said.
Uncertainty and confusion have been the themes driving the markets in April. As we have noted in the past, markets do not like uncertainty, and so a negative reaction to the ever-shifting status of tariffs and trade negotiations since April 2 wasn’t entirely surprising. What was surprising was the market’s willingness to react in such a forceful and steadfast nature to Trump’s trade comments last week. Stocks rallied on the final four days of the week even as Beijing denied that trade discussions were taking place. Investors were probably feeling desperate for any good news to latch onto after a rough go over the last several weeks.
However, before stocks found their footing from Tuesday on, the major U.S. indexes all lost more than 2% on Monday. A diatribe from Trump targeting U.S. Federal Reserve (Fed) Chairman Jerome Powell was the catalyst for Monday’s slump. Trump has repeatedly signaled that he would like Powell to quickly lower interest rates in an effort to support the economy while the White House pursues its trade policy ambitions. We’ve noted in the past that the Fed is in an unenviable situation where its dual mandate goals of full-employment and price stability (low and steady inflation) are “in tension” according to Powell. Tariffs will likely put at least some upward pressure on prices and could lead to a weaker economy. The Fed’s primary monetary policy tool is interest rate adjustment. In this case, if it is forced to lower its target interest rate to support the economy, it runs the risk of reigniting inflationary embers that haven’t been fully extinguished. Adding the pressure of tariffs to the equation further complicates an already treacherous path for Fed policymakers, and we understand the decision to remain focused on data rather than politics.
Trump has previously hinted at the possibility of firing Powell before his term is scheduled to end in May 2026. Powell has always dismissed the possibility of such a move, often noting the unconstitutionality of the idea. However, the Trump administration has reportedly begun to explore its legal options to remove Powell prematurely. The good news is that someone in the Trump administration must have convinced the President that firing Powell would do more harm than good. On Tuesday, at the same time that the President teased a trade deal with China, he also reversed course on Powell saying he had no intention of firing him. This came as a huge relief to those worried that the move would lead to more market volatility—especially in the bond market—and would lead to a drawn-out fight over the legality of such a move.
Members of the Trump administration do seem to be working on other trade deals, although nothing concrete has emerged. July 10 will mark the end of the 90-day tariff pause, and much of last week’s rally seems to be tied to the idea that deals will materialize soon. Some 90 countries have sought talks with the White House, and while we may see some deals emerge in the coming weeks and months, there are really just a handful of major economies (China included) that will matter. Signs of progress will be increasingly important, especially as consumers and corporations alter spending and investment plans in the face of uncertainty.
We are in the midst of the second-quarter earnings season, and corporate spending plans are top of mind for investors tracking management commentary. Wall Street analysts and investors are less interested in this quarter’s backward-looking results and more interested in how corporations are feeling about the rest of 2025 as they face tariffs, and the uncertainty associated with them. Nearly 40% of the companies in the S&P 500 have reported quarterly results so far, and while results have been roughly in line with expectations, guidance for the remainder of the year has started to weaken. The number of companies that have issued negative guidance continues to grow, especially in the more economically sensitive sectors. Some companies have even chosen to completely withdraw guidance or opt to provide two sets.
Corporate managers are clearly growing frustrated by the level of uncertainty, and we expect 2025 earnings estimates to continue to fall unless resolution materializes soon. However, the damage may already be done as a month of complete uncertainty has likely paralyzed managers hoping to avoid making major decisions in a time where the Trump Administration’s approach to trade policy can change inside of a single day.
The coming week is filled with impactful economic data. Tuesday will bring an update on the trade deficit in goods—this is the source of Trump’s trade anxiety—as well as consumer confidence, which has fallen significantly in 2025. Wednesday holds an update on the Fed’s preferred measure of inflation as well as another revision to first-quarter Gross Domestic Product. The rest of the week will feature a variety of employment data. The labor market continues to remain resilient in the face of growing economic angst, and any cracks here could be the first sign of bigger issues ahead.
| TIME (ET) |
REPORT |
PERIOD | MEDIAN FORECAST | PREVIOUS |
| MONDAY, APR. 28 | ||||
| None scheduled | ||||
| TUESDAY, APR. 29 | ||||
| 8:30 am | Advanced U.S. trade balance in goods | March | — | $147.8B |
| 9:00 am | S&P Case-Shiller home price index | Feb. | — | 4.7% |
| 10:00 am | Consumer Confidence | April | 87.7 | 92.9 |
| 10:00 am | Job openings | March | 7.4M | 7.6M |
| WED., APR. 30 | ||||
| 8:15 am | ADP employment | April | 110,000 | 155,000 |
| 8:30 am | GDP | Q1 | 0.4% | 2.4% |
| 8:30 am | Consumer spending | March | 0.5% | 0.4% |
| 10:00 am | PCE price index (y/y) | March | 2.2% | 2.5% |
| 10:00 am | Core PCE price index (y/y) | March | 2.5% | 2.8% |
| 10:00 am | Pending home sales | March | 1.0% | 2.0% |
| THURSDAY, MAY 1 | ||||
| 8:30 am | Initial jobless claims | Mar. 22 | 226,000 | 222,000 |
| 9:45 am | Manufacturing PMI | April | — | 50.7 |
| 10:00 am | ISM manufacturing | April | 47.8 | 49.0 |
| 10:00 am | Construction spending | March | 0.3% | 0.7% |
| FRIDAY, MAY 2 | ||||
| 8:30 am | U.S. nonfarm payrolls | April | 130,000 | 228,000 |
| 8:30 am | U.S. unemployment rate | April | 4.2% | 4.2% |
| 8:30 am | U.S. hourly wages (y/y) | April | — | 3.8% |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market