Stocks slid on Trump’s China trade and Iran war tensions

·       Oil and Gold spiked on escalating Iran-Israel warmongering and evacuation of US personnel from Iraq and other potentially risky Middle East locations

·       Although Trump announced 55% tariffs on China as a preliminary offer, he may soon withdraw the 20% Fentanyl levy and 5% reciprocal tariffs to bring it to 30% Geneva agreement levels

·       Trump wants to open up the Chinese market more for US goods & services, especially in erstwhile restricted areas

·       Trump may also be pressuring Iran either to accept his nuclear deal or face an all-out war with Israel;

·       Higher global supply and subdued demand may not allow a durable rally in oil above $70-80

·       Dow Futures slid early Thursday after an 11-year-old Boeing 787 plane crashed in India, Ahmedabad; Boeing down almost 8% in pre-market trading

Wall Street Futures were buoyed in the last few days on hopes of meaningful progress in the US-China trade deal 2.0 amid the 2nd meeting in London from June 9, 2025. High-level delegations from the US and China convened at Lancaster House in London on June 9, 2025, for the second round of trade negotiations aimed at de-escalating a trade war between the world’s two largest economies. The talks extended into a second day on June 10, focusing on critical issues such as tariffs, the export of rare earth minerals, and access to advanced technology. The discussions followed a temporary 90-day tariff truce agreed upon in Geneva in May 2025 and a phone call between U.S. President Donald Trump and Chinese President Xi Jinping on June 5, 2025.

Eventually, on the early Wednesday of the Asian session, June 11, 2025, both U.S. and Chinese officials confirmed that negotiators had reached a framework agreement to implement the consensus from the May 2025 Geneva meeting and the June 5, 2025, phone call between President Trump and Xi. This framework aims to stabilize the 90-day tariff truce, addressing issues like rare earth mineral exports and tariff reductions. However, it requires approval from both Presidents before implementation. The agreement marks progress but leaves deeper trade disputes unresolved, with further negotiations needed before the August 10, 2025, deadline to avoid tariff escalation.

The US and China de-escalated trade tensions, agreeing to a preliminary deal on how to implement the consensus reached in Geneva, according to negotiators for both sides. While the full details of their accord weren’t immediately available, US negotiators said they “absolutely expect” that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation.

Chinese Vice Premier He Lifeng said on Wednesday that China's stance in trade talks with the US is "clear and consistent," adding that Beijing is sincere in its hopes to reach a solution but will stand by its principles. Earlier, negotiators from China and the US said they reached a preliminary trade framework following several rounds of talks. He urged the US to keep its promises and deliver on the bilateral agreements. He also warned that Beijing is "not willing to fight but not afraid to do so if needed," calling on both sides to enhance consensus and maintain communication to "reduce misunderstandings." He stressed the need for long-term trade and economic ties between the world's two largest economies.

Trump imposed 55% tariffs on China (including a 20% Fentanyl levy) as a part of a preliminary deal to bring China/Xi to the negotiation table. On June 11, 2025, early US Session Wednesday, Trump posted on Truth, announcing that the preliminary trade deal with China was "done," pending final approval between himself and Chinese President Xi Jinping. The post highlighted that the agreement includes China supplying "full magnets" and "any necessary rare earths" to the U.S. upfront, while the U.S. would provide what was agreed upon in return. The deal imposes a 55% tariff on Chinese goods entering the U.S., compared to a 10% tariff on American exports to China.

·       OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME. FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UPFRONT, BY CHINA. LIKEWISE, WE WILL PROVIDE TO CHINA WHAT WAS AGREED TO, INCLUDING CHINESE STUDENTS USING OUR COLLEGES AND UNIVERSITIES (WHICH HAS ALWAYS BEEN GOOD WITH ME!). WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT! THANK YOU FOR YOUR ATTENTION TO THIS MATTER!

·       Adding to the China readout, President XI and I are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!

Trump’s latest Truth post follows earlier tensions, as Trump had previously accused China of violating a May 12, 2025, trade agreement that reduced U.S. tariffs on Chinese goods from 145% to 30% including (Fentanyl levy of 20%) and Chinese tariffs on U.S. goods from 125% to 10% for 90 days. On May 30, 2025, he claimed China had "totally violated" this agreement, citing issues like China's slow compliance with easing non-tariff barriers, such as export restrictions on rare earth minerals. Trump’s June 11 post suggests progress in negotiations, possibly following a June 5 phone call between him and Xi, their first since the tariff disputes escalated, where they discussed trade and planned further in-person talks.

Trump’s figure of 55% Chinese tariffs is his original April 2 ‘Liberation Day’ 34% + 20% Fentanyl levy imposed earlier on March 4, 2025. The 34% Chinese Reciprocal Trump Tariff was already layered on top of existing duties, including a 25% Section 301 tariff from Trump’s first term. Trump imposed China-specific 24% additional reciprocal tariffs in addition to 10% basic universal tariffs on April 2. China also imposed various retaliatory tariffs of around 20% on US goods.

China’s concessions include supplying magnets and rare earths, critical for U.S. industries, while the U.S. maintains leverage with higher tariffs, market access, and some critical parts of jet engines and nuclear turbine/nuclear energy. Trump may soon lift his Fentanyl levy of 20% if China demonstrates progress on curbing precursor chemicals; we may have an in-person meeting between Trump and Xi soon, where Trump may scale back his 20% Fentanyl tariffs. Trump may also scale back another 10% of reciprocal tariffs in exchange for greater Chinese market access for US goods and services, as Trump wants to open up the Chinese market more for US goods & services.

The "Liberation Day" tariffs, announced by Trump on April 2, 2025, aimed to address trade imbalances and protect U.S. manufacturing, with a 10% baseline tariff on all merchandise imports and higher rates for countries like China, Vietnam, and India for higher tariffs and non-tariff regulatory barriers. For example, the Trump admin is now pressuring India for greater market access along with lower comparable tariffs for US farm & dairy products in India, something which India is vehemently opposing.

Trump’s Fentanyl tariff, initially 10% on February 4 and raised to 20% on March 4, targets China’s alleged role in the synthetic opioid crisis in the US, though China denies subsidizing Fentanyl precursors. The deal’s 55% tariff rate, while a reduction from the peak of 145%, still exceeds pre-Liberation Day levels (around 27% average effective rate), potentially raising U.S. consumer prices. No final text of the agreement was available as of June 11, 2025, leaving some uncertainty about enforcement and additional terms.

Will China agree with such Trump tariffs of 55% against 10% on US goods?

Whether China will agree to the proposed trade deal with a 55% U.S. tariff on Chinese goods versus a 10% Chinese tariff on U.S. goods, as outlined in Trump’s June 11, 2025, Truth Social post, depends on several factors, including China’s strategic interests, economic calculations, and geopolitical considerations.

Reasons China Might Agree

Access to U.S. Market: The U.S. is a critical export market for China, with $427 billion in goods exported to the U.S. in 2024. A 55% tariff, while high, is significantly lower than the 145% tariff embargo imposed earlier in 2025, which China reportedly violated by not fully complying with non-tariff barrier reductions. Agreeing to 55% could stabilize access to the U.S. market compared to the risk of even higher tariffs (Trump threatened 100% + in earlier posts).

Rare Earths and Magnets Concession: The deal requires China to supply “full magnets” and “any necessary rare earths” upfront. China has monopoly control over 80-90% of global rare earth production and has used export restrictions as leverage in past disputes. By agreeing to supply these critical materials, China may secure favorable terms for its other exports and avoid further U.S. restrictions on strategic minerals, which are vital for the U.S. tech and defense industries.

Fentanyl Tariff Mitigation: The 55% tariff includes a 20% fentanyl-related levy, which China could negotiate a reduction or removal of this tariff by demonstrating progress on curbing Fentanyl precursor exports, a key U.S. demand. This could lower the effective tariff rate closer to 35%, making the deal more palatable.

Geopolitical Stability: The June 5, 2025, call between Trump and Xi indicates ongoing dialogue. China may see the deal as a way to avoid escalation into a broader trade war or military tensions, especially given Trump’s threats to involve Taiwan in negotiations (e.g., his March 31, 2025, Truth Social post). A 10% tariff on U.S. goods is relatively low, preserving China’s ability to import American agricultural and energy products.

Domestic Economic Pressures & Social Stability: China’s economy faces challenges, including a property sector crisis and slowing growth (GDP growth projected at 4.8% for 2025). Securing a deal, even with unfavorable tariff ratios, could stabilize trade relations and boost investor confidence, particularly if it ensures continued U.S. demand for Chinese goods.

Reasons China Might Resist

Domestic Political Audience/Compulsion for Asymmetric Tariff Rates: A 55% U.S. tariff versus a 10% Chinese tariff is heavily skewed, compared to the May 12, 2025, truce (30% U.S. vs. 10% China). The Chinese public may view this as unfair, especially since the U.S. trade deficit with China was $279 billion in 2024, and higher tariffs could exacerbate imbalances by raising costs for Chinese exporters. During Trump’s 1st term, China has vehemently resisted unequal trade terms, and despite Trump’s 24/7 tweets, pressure, and White House circus, Trump's trade deal 1.0 took over 2 years of marathon trade talks.

Domestic Backlash: Agreeing to high tariffs could be seen as a concession to U.S. pressure, risking nationalist criticism within China. The Chinese Communist Party (CCP) prioritizes domestic stability, and leaders may hesitate to appear weak, especially after Trump’s accusations of China violating prior agreements. The CCP will not allow its supreme commander, President Xi, to look weak at Trump’s gunpoint.

Alternative Markets: China has diversified its trade partnerships through initiatives like the Belt and Road (BRI) and RCEP. With exports to ASEAN and EU markets growing (e.g., $870 billion to ASEAN in 2024), China might prioritize these over accepting high U.S. tariffs, though the U.S. remains a top destination; the US is China’s top exporting customer; currently, the US constitutes 15% of China’s overall export volume directly. China is developing other underdeveloped economies across the world in terms of infrastructure and other developments, so that those countries can absorb Chinese goods & services directly or indirectly. China has had a long-term plan for the last two decades to reduce its export dependence on the US and also the EU/Europe.

Rare Earth Leverage: China’s control over rare earths gives it significant bargaining power. It may demand more concessions, such as U.S. investment in Chinese tech sectors or relaxed export controls, before agreeing to supply magnets and minerals under a high-tariff regime.  As per a WSJ report, China may impose a six-month limit on rare-earth export licenses for selected U.S. automakers and manufacturers, giving Beijing leverage if trade tensions flare up again.

Fentanyl Tariff Disputes: China denies subsidizing Fentanyl precursors and has resisted U.S. claims. Agreeing to the 20% fentanyl tariff could be seen as admitting responsibility, a politically sensitive issue. China might push for exemptions or alternative enforcement mechanisms.

Likely Outcome

China may push for clarifications or adjustments, especially on Fentanyl tariffs or rare earth export terms, before finalizing. Trump may soon lift 20% Fentanyl tariffs along with 5% reciprocal tariffs, honoring China’s commitments to open up its domestic market for US goods & services. China’s President Xi and top CCP leadership may also prioritize long-term U.S. market access and avoid escalation, China is likely to agree, possibly with minor tweaks, while Trump is also bound to scale back his 55% tariffs to at least 30% Geneva agreement levels as these ‘Chinese’ tariffs will have to be borne by mostly US importers of Chinese merchandise f\goods and US consumers. For example, most ordinary Americans may not afford to wear decent shoes or clothes if imported costs soar by another 55% on top of the existing 20% (wef from 2018, Trump 1.0). Thus, Trump will be under more pressure than his counterpart, Xi, and is more likely.

U.S. Treasury Secretary Scott Bessent’s Senate testimony on June 11, 2025, focused on the state of the international financial system amid ongoing U.S.-China trade tensions and domestic economic priorities

U.S.-China Trade and Tariffs: Bessent emphasized the potential for a “big, beautiful rebalancing” of U.S. and Chinese economies if China upholds its commitments under the Geneva Agreements. He stressed that China must act as a “reliable partner” in trade talks for this rebalancing to occur. He addressed the proposed 55% U.S. tariff on Chinese goods (versus 10% Chinese tariffs on U.S. goods), noting that these tariffs are part of President Trump’s strategy to address unfair trade practices. Bessent indicated that the 90-day tariff pause in place could be extended, suggesting flexibility in negotiations. Bessent acknowledged the high tariff rates, stating they are “big numbers” and not sustainable long-term, but defended their use as leverage in trade negotiations with China.

Fiscal Policy and the BBB Tax Bill: Bessent strongly supported the “One Big Beautiful Bill,” a major tax and economic package, warning that failure to pass it could trigger the “biggest financial crisis since 2008–2009.” He argued that not passing the bill would result in a $4 trillion tax hike due to the expiration of Trump’s 2017 tax cuts, severely impacting the middle class and economy. He highlighted the bill’s benefits, including no tax on tips, overtime, and social security and auto loan deductibility for U.S.-made vehicles, as non-negotiable priorities. The bill also offers 100% expensing for new and expanding U.S. factories to boost manufacturing and R&D. Bessent countered fears of a fiscal blowout, arguing that the tax cuts would drive economic growth and that the bill’s passage is critical to avoid economic calamity.

Debt Ceiling and Fiscal Responsibility: Addressing concerns about the debt ceiling, Bessent asserted that the U.S. would “never default,” describing the mid-July deadline as a “warning track” but not an absolute crisis point. He avoided specifying an exact “X date” for default to maintain negotiating leverage. He emphasized working closely with Senate Majority Leader John Thune and House Speaker Mike Johnson to ensure the tax bill, which includes a debt ceiling increase, progresses through Congress.

IRS and Budget Efficiency: Bessent noted a $2 billion cut in IRS technology spending, framing it as part of efforts to improve government efficiency. He also reported that May 2025 budget receipts were up 14.7% year-over-year, reflecting a successful tax filing season with improved IRS efficiencies. He reaffirmed his commitment to maintaining the IRS Direct File program for the 2025 tax season, despite Republican criticism that it is redundant.

Federal Reserve and Other Priorities: Bessent dismissed speculation about his interest in replacing Federal Reserve Chairman Jerome Powell, stating he is focused on his Treasury role. He reiterated support for Federal Reserve independence and the U.S. dollar’s role as the world’s reserve currency, consistent with his January 2025 confirmation hearing.

Trade Strategy: Bessent’s comments reflect the Trump administration’s “America First” approach, using tariffs as a tool to incentivize fair trade and domestic manufacturing while maintaining flexibility in negotiations with China. His reference to a potential tariff pause extension suggests ongoing diplomatic efforts to avoid escalation.

Economic Optimism: Bessent framed the administration’s policies—tariffs, tax cuts, and deregulation—as interlocking components to drive growth, with 464,000 new jobs added in the first 100 days of Trump’s second term as evidence of early success.

Congressional Pushback: While Bessent’s testimony emphasized economic growth and trade rebalancing, some skepticism about the fiscal impact of the tax bill and the sustainability of high tariffs, with critics noting potential risks to U.S. consumers and global trade stability.

Highlights of Comments by US Treasury Secretary Bessent in the Senate Testimony: June 11, 2025

·       Stablecoins could lock in dollar dominance

·       Stablecoin legislation backed by US Treasuries will expand US dollar usage

·       Removing SLR in the past had a substantial yield effect

·       Nations negotiating in good faith could see trade deadlines rolled forward

Oil spikes almost 5% on escalating Iran tensions.

Oil prices surged almost 5% late Wednesday, June 11, 2025, amid escalating Middle East tensions. Brent crude futures climbed $2.90 (4.34%) to $69.77 per barrel, and WTI crude rose $3.17 (4.88%) to $68.15. The spike was triggered by U.S. preparations to evacuate nonessential embassy staff from Iraq, Kuwait, and Bahrain, following Iran’s threats of strikes on U.S. bases if nuclear talks collapse. The U.S. also authorized voluntary departures for military dependents in the region. Despite the price jump, ample global oil supply and OPEC+ spare capacity may limit further increases unless significant disruptions occur.

US State Department Official:

·       US Prepares Departure of All Nonessential Staff From Iraq, Kuwait, Bahrain Embassies. Iraq has not recorded any security indication that calls for evacuation.

·       US Defence Secretary Hegseth has authorized the voluntary departure of military dependents from locations across the Middle East

·       We decided to reduce the US mission in Iraq based on our latest security analysis

·       US officials have been told Israel is fully ready to launch an operation into Iran

Iran's mission to the UN:

·       Threats of overwhelming force won’t change facts, Iran is not seeking nuclear weapons, and US militarism only fuels instability

·       US legacy of fueling regional instability, through arming aggressors and enabling Israeli crimes, strips it of any credibility to speak on peace or non-proliferation

·       Diplomacy, not militarism, is the only path forward

Iran's President Pezeshkian:

·       We are holding talks with the US and Europe, but we will not surrender to force

·       'All US Bases Within Our Reach': Iran Responds To Threats From Washington

Trump:

·       I am more confident than ever that in the days ahead and every generation to come, the U.S. Army will heap glory upon glory. You will summon inexhaustible courage. You will protect every inch of U.S. soil—and you will defend America to the ends of the earth!

·       Trump confirms US personnel relocation from parts of the Middle East- it can be a perilous location.

·       The order to move staff out had been given because the region could be a dangerous place.

·       We’ll see what happens. We’ve given notice to move out, and we’ll see what happens.

·       They (Iran) can’t have a nuclear weapon, very simple. We’re not going to allow that—they don’t need to enrich uranium--

·       Willing to extend trade deadlines, but won't need to-- at a certain point on trade, we will take it or leave it.

·       Trump to send trade letters to countries within 1-2 weeks

·       Trump to set unilateral tariff rates within two weeks

Is the Israel/US-Iran war brewing, or is warmongering a negotiation tool to bring Iran in line?

The escalating tensions in the Middle East signal a precarious moment for regional and global stability, driven by the looming possibility of an Israeli strike on Iran’s nuclear facilities and the broader geopolitical ramifications. The convergence of Iran’s threats to retaliate with a massive ballistic missile attack, similar to its October 2024 salvo, and Israel’s readiness to act unilaterally underscores the high stakes of the ongoing nuclear negotiations. The U.S., caught between its strategic interests and diplomatic efforts, is preparing for potential fallout by evacuating nonessential embassy staff from Iraq, Kuwait, and Bahrain and authorizing voluntary departures of military dependents. These precautionary measures, coupled with emergency action committees convened across U.S. missions in the Middle East, North Africa, and Eastern Europe, reflect the serious risk of Iranian retaliation targeting U.S. forces, as Iran has explicitly warned.

The oil market’s reaction, with Brent and WTI crude prices surging over 4% on June 11, 2025, highlights the economic ripple effects of this crisis. While global oil supplies and OPEC+ spare capacity may mitigate prolonged price spikes, any significant disruption, such as a broader conflict involving Iran’s oil infrastructure, could have far-reaching consequences for energy markets and global economies.

The sixth round of U.S.-Iran nuclear talks, set to commence in Oman this weekend, represents a critical juncture. Iran’s insistence on continuing uranium enrichment under IAEA supervision, paired with U.S. demands for stricter controls and President Trump’s public skepticism about a deal, suggests that diplomatic resolution remains elusive. Israel’s concerns about a potential agreement failing to curb Iran’s nuclear ambitions add further complexity, as it perceives an existential threat in Iran’s 60% uranium enrichment, perilously close to weapons-grade levels.

The broader implications of this standoff extend beyond the immediate region. Iran’s threat to hold the U.S. accountable alongside Israel raises the specter of a wider conflict, potentially drawing in regional actors and complicating U.S. alliances. The U.S.’s decision not to assist Israel with its potential strike, while maintaining a high alert status, reflects a delicate balancing act to avoid direct entanglement while managing escalation risks. U.S. evacuations may also signal a lack of guaranteed U.S. intervention to restrain Israel, underscoring the strategic messaging at play.

A senior Iranian official told Reuters on June 12, 2025, that Iran will not relinquish its right to enrich uranium despite escalating regional tensions and the threat of an Israeli strike on its nuclear facilities. The official revealed that a “friendly” regional country warned Tehran of a potential Israeli military operation, which is seen as an attempt to pressure Iran into altering its stance on nuclear rights ahead of the sixth round of U.S.-Iran nuclear talks scheduled for this weekend in Oman. Iran maintains its nuclear program is for civilian purposes, with uranium enriched to 60%—close to weapons-grade—under IAEA supervision, but the U.S. and Israel demand stricter limits. Although Iran is confident about reaching the nuclear deal 2.0 with the US in the coming days, dealmaker Trump has less confidence.

Conclusions: Wall Street under stress on Trump’s China trade and Iran war suspense

China’s Xi believes in protocol-based trade diplomacy in contrast with Trump’s Truth/Twitter-based bullying strategy. But as a courtesy, Trump may soon withdraw his Fentanyl tariff (20%) against China to ease restrictions on rare earth material exports.  Overall, Trump’s trade negotiations with various countries like China, India, the EU, South Korea, Japan, Mexico, Canada, and Vietnam are progressing and Trump may again extend his July 9  (ROR) and August 31 deadline (China) to least December 31, 2025 to pave the way for policy certainty for both Wall Street and Main Street; Fed may also cut rates from September if Trump’s tariff & trade policy becomes consistent and clear by August 2025. The US collected a record $22bn in tariffs in May, which was just 3% of total government spending, while Trump's tariff & trade war uncertainty is causing damage, risking supply shock for the US economy.

Market impact

Wall Street wobbled Wednesday; stocks and Gold were initially buoyed by softer-than-expected US core CPI inflation data, but wobbled soon after Trump’s 55% tariff Truth on China (subject to approval and further negotiations). If Trump imposes such unilateral tariffs on various trading partners and then goes for negotiations with an extension of the current pause to December’25, even then the US supply chain will be under suspense. On mid-Wednesday, Wall Street Futures stumbled, while Oil and Gold spiked on escalating Iran tensions. The S&P 500 slipped 0.3% to snap a 3-day win streak, the Nasdaq lost 0.5%, and the Dow finished flat.

On Wednesday, Wall Street was boosted by energy (higher oil), utilities, healthcare, and industrials to some extent, while dragged by consumer discretionary, materials, communication services, real estate, consumer staples, techs, and financials. Dow Jones (DJ-30) was boosted by United Health, IBM, Goldman Sachs, 3M, Caterpillar, Chevron and the 3M, while dragged by Amazon, Home Depot, Apple, Walmart, Cisco, Merck, Nike, and Boeing.

On early Thursday, June 12, 2025, Dow Futures slid after a Boeing 787 Dreamliner jet, currently operated by Air India/Tata Airlines, crashed just after takeoff from Ahmedabad to London. Gold and oil prices rose after Trump stressed dialogue with Iran rather than war.

Technical outlook: DJ-30, NQ-100, Gold and Silver

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 42600) now has to sustain over 42900 for a further rally towards 43200/43600*-44000/45300 in the coming days; otherwise sustaining below 42800, DJ-30 may again fall to 41900/41700-41400/41000* and further 40600/40100-39200/38000 in the coming days.

Similarly, NQ-100 Future (21600) has to sustain over 22000 for a further rally to 22400/22500-22700/23000 in the coming days; otherwise, sustaining below 21900, NQ-100 may again fall to 21900/20900-20700/20200 and 19890/18300-17400/16400in the coming days.

Technically Gold (CMP: 3350) has to sustain over 3375-3395 for a further rally to 3405/3425*-3450/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3365, Gold may again fall to 3340/3320-3300/3280 and 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.

Also, technically, Silver (CMP: 36.50) has to sustain over 38.00 for a further rally to 40.00/45.00-49.00/50.00 in the coming days; otherwise, sustaining below 37.00, Silver may again fall to 36.00/34.50-32.00/31.50 and 31.00-30.50 in the coming days.

Also, technically, Silver (CMP: 36.50) has to sustain over 38.00 for a further rally to 40.00/45.00-49.00/50.00 in the coming days; otherwise, sustaining below 37.00, Silver may again fall to 36.00/34.50-32.00/31.50 and 31.00-30.50 in the coming days.