US stocks closed sharply lower on Wednesday as chipmaker Nvidia warned of negative impacts stemming from new US government curbs on its chip exports to China, while Federal Reserve chairman Jerome Powell said US economic growth appears to be slowing, Reuters reported. A Chinese expert said Powell’s remarks indicate that the adverse impact of US’ reckless tariff policy has started to emerge, which will push up US domestic inflation and weigh on American consumers.
The Dow Jones Industrial Average plunged by 699.57 points, or 1.73 percent, to close at 39,669.39, the S&P 500 lost 120.93 points, or 2.24 percent, to 5,275.70, and the Nasdaq Composite lost 516.01 points, or 3.07 percent, to 16,307.16.
Powell, in remarks for the Economic Club of Chicago, said the US’ larger-than-expected tariffs likely mean higher inflation and slower economic growth. He noted the US central bank would wait for more data on the economy’s direction before making any changes to interest rates.
Powell’s remarks indicate that the negative impact of the US government’s tariffs has started to emerge, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Thursday.
The US’ tariffs will increase prices for imports, and accordingly worsen US inflation and increase the burden on American households. In addition, the countermeasures from the US’ major trading partners will also dent the US’ exports and shortcut its economy, Dong said.
Nvidia said late on Tuesday it would take $5.5 billion in charges after the US government limited exports of its H20 artificial-intelligence chip to China, a key market for one of its most popular chips, per Reuters.
Fears of a sharp economic downturn due to the US government’s ever-changing tariff policies are pervading Wall Street, as some of the most trusted observers of the economy say the US is far from able to declare victory on a tariff-driven recession, Forbes reported on Wednesday.
In a related development, California Governor Gavin Newsom sued the Trump administration on Wednesday, challenging the US president’s authority to impose sweeping tariffs that have set off a global trade war, according to the Associated Press.
The lawsuit said that the US president’s use of the International Emergency Economic Powers Act to impose tariffs on Mexico, Canada and China or a 10-percent baseline tariff on all imports is unlawful. “The act enables a president to freeze and block transactions in response to foreign threats but doesn’t allow the president to adopt tariffs, the suit says,” the AP reported.
The Trump administration’s unlawful tariffs are wreaking chaos on California families, businesses, and our economy – driving up prices and threatening jobs. “We’re standing up for American families who can’t afford to let the chaos continue,” Newsom said in a statement posted on the local government website.
“The US has applied ‘the art of the deal’ in international exchanges and dealing with international exchanges, and seeks interests by exerting maximum pressure. The US’ frequent use of tariffs as a tool has undermined its relations with its major trading partners, disrupt global trade order and cast a pall on the prospects of the global economy,” Hu Jianguo, a professor at Tianjin-based Nankai University, told the Global Times on Thursday.
The WTO sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday, saying further US tariffs and spill-over effects could lead to the heaviest slump since the height of the COVID pandemic, according to Reuters.
The WTO said it expected trade in goods to fall by 0.2% this year, down from its expectation in October of 3.0 percent expansion. “I’m very concerned, the contraction in global merchandise trade growth is of big concern,” WTO Director General Ngozi Okonjo-Iweala told reporters in Geneva.
The WTO estimates that merchandise trade between China and the US will fall by 81 percent – a drop that could have reached 91 percent without recent exemptions for products such as smartphones, according to the report.
China has repeatedly stressed its stance against the US tariffs. “Tariff and trade wars have no winners. China does not want to fight these wars but is not scared of them. If the US truly wants to resolve the issue through dialogue and negotiation, it should stop using maximum pressure, stop threats and blackmail and seek dialogue with China on the basis of equality, respect and mutual benefit,” Chinese Foreign Ministry spokesperson Lin Jian said on Wednesday. GT
