Trump Trade War: How Renewed Trade Tensions Hammered U.S. Stock Market

The U.S. stock market dropped sharply after renewed trade war tensions between the U.S. and China. China’s new export controls on rare earth materials and Trump’s 100% tariffs on Chinese goods triggered a wave of selling on Wall Street. The S&P 500 (SPX) and Nasdaq 100 dropped to multi-week lows as investors feared deeper supply chain disruptions and weaker corporate earnings.

China’s Export Controls and Trump’s Tariffs Reignite Trade War Fears

China escalated the trade war by expanding export controls on rare earth materials just two weeks before the scheduled APEC summit between Xi Jinping and Donald Trump. China added five new rare earth elements and dozens of refining technologies to its export restriction list. This move targeted the U.S. semiconductor and defence sectors and signalled a tighter grip on China’s critical supply chains.

Trump called the move a “real surprise” and hinted that the summit might be cancelled. The sudden action reignited fears of a breakdown in U.S.–China trade negotiations.

In response, President Trump announced a 100% tariff on all Chinese exports to the U.S. and new export controls on critical software. These measures aimed to retaliate against China’s restrictions but added significant stress to global markets.

Trump’s decision reignited concerns over prolonged trade tensions. These tensions threaten supply chain stability, especially in tech and manufacturing sectors that rely heavily on rare earths and advanced semiconductors.

S&P 500 and Nasdaq 100 Break Key Supports Amid Tariff Shock

The S&P 500 and Nasdaq 100 reacted to the news and recorded the largest one-day declines since April. The S&P 500 dropped below its short-term support near 6,700. A break below 6,500 could trigger a deeper correction toward the 6350 level.

The daily chart for the S&P 500 shows that the index is approaching the 50-day SMA. It has broken below the ascending channel pattern and appears likely to decline further toward the long-term support area around 6,000. However, the induced volatility in the financial market will keep the index volatile. Therefore, a strong rebound may develop from current levels.

This is also evident on the 4-hour chart, as the S&P 500 has broken below the ascending channel support at the 6,600 level and appears poised to move lower. A rebound toward the 6,700-6,800 region may trigger renewed selling pressure.

Tech Stocks and Global Firms Under Pressure

Big Tech stocks dependent on China’s rare earth supply chain suffered sharp losses. Nvidia Corp. (NVDA) and Qualcomm Inc. (QCOM) came under scrutiny from Chinese regulators. Moreover, China launched an antitrust probe into Qualcomm’s recent acquisition, further intensifying U.S.–China tech tensions.

Nvidia was also accused of breaching China’s anti-monopoly laws during recent trade discussions in Madrid. This highlights the growing regulatory scrutiny on foreign companies operating in China.

On the other hand, rising uncertainty has added to market volatility. The reports of potential delays to the TikTok deal and regulatory investigations into U.S. companies have introduced new challenges to already fragile trade relations.

Moreover, the Chicago Fed’s National Financial Conditions Index dropped to -0.546 on 3 October, indicating that financial conditions remain accommodative.

Nasdaq Technical Analysis

The weekly chart for the Nasdaq 100 shows a strong bearish hammer forming near the long-term resistance at the 25,000 level. This sharp rejection suggests that the index may continue to move lower in the coming weeks.

However, the index opened with a strong gap higher and shows strong volatility. Immediate support lies near the 23,500 level, followed by the 20,000 level. However, the presence of a prior cup formation suggests that the index may soon find support and continue higher. The ascending broadening wedge pattern further indicates the potential for the index to resume its upward trend.

The daily chart for the Nasdaq 100 also shows an ascending broadening wedge pattern forming above an inverted head and shoulders pattern. Immediate support lies at 23,500, and a break below this level could push the index toward 22,700. However, a strong rebound may follow once the correction completes.

The short-term outlook for the Nasdaq 100 shows it is trading within an ascending channel. The price has rebounded from support near the 24,000 level. However, ongoing market uncertainty and extreme overvaluation in the S&P 500 signal continued instability in the U.S. stock market.