Trump Trade War: S&P 500 Eyes 7000 Despite Tariffs and Economic Headwinds

U.S. President Donald Trump’s tariff strategy has redefined the global trade landscape. The aggressive push for bilateral deals and reciprocal tariffs has rattled financial markets and raised serious concerns among investors. On August 7, Trump’s executive order introduced tariffs ranging from 10% to 41% on exports from 69 trading partners. This move pushed average U.S. import duties to their highest levels in a century.

The latest round of levies includes a 100% tariff on branded pharmaceutical imports and a 25% duty on heavy-duty trucks. Trump has made it clear that reshaping global trade is a core pillar of his economic agenda. The decision to exempt companies that build manufacturing plants in the U.S. shows his intent to bring back domestic production. These protectionist moves have injected fresh volatility into the markets.

Trump’s Tariff Policy Redefines Global Trade

Several upcoming events mark key inflection points for the future of U.S. trade policy. On October 1, pharmaceutical and truck tariffs took effect. In addition, new duties of up to 25% on timber, kitchen cabinets, and furniture will come into force on October 14. Furthermore, Canadian Prime Minister Mark Carney is scheduled to meet with President Trump in Washington to discuss economic and security matters.

Meanwhile, the United States and China extended their tariff truce through early November, offering only temporary relief. As the holiday season ramps up, businesses face difficult decisions about sourcing and pricing. On January 1, 2026, even higher duties will hit select imports, raising costs to 30% for furniture and 50% for cabinets and vanities from non-allied nations. Overall, these staggered tariff announcements keep markets in a constant state of adjustment.

Weak Jobs Data Raises Recession Concerns

Labour market data is adding to market stress, which is already heightened by tariffs. With the regular BLS jobs report delayed due to the government shutdown, ADP private payroll data has taken centre stage.

The chart below shows that September recorded a surprise job loss of 32,000 against expectations for a 50,000 gain. Moreover, August’s figure was revised from a gain to a small decline. These figures point to a cooling labour market and rising recession risks.

Loose Monetary Policy Supports Stock Market Rally

Despite worsening fundamentals, the financial system remains flush with liquidity. The Chicago Fed National Financial Conditions Index continues to trend lower, reflecting loose monetary conditions. As a result, investors remain willing to bid up risk assets, including equities. Consequently, this backdrop provides a strong tailwind for the S&P 500.

S&P 500 Technical Setup Points to Further Upside

The daily chart for the S&P 500 clearly shows a strong bullish formation, highlighted by an inverted head-and-shoulders pattern. Notably, the index broke the neckline of this pattern in June 2025 at the 6,000 level. Since then, the index has been trading within an ascending channel and is currently consolidating near the 6,720 region. This level is seen as strong resistance for the S&P 500. Therefore, a decisive break above 6,720 could push the index toward the 7,000 level.

The 4-hour chart for the S&P 500 also shows an ascending channel pattern, with the index trending higher within the channel. Strong support remains near the 6,600 level, with a potential upside target at 7,000.

The expectations of aggressive Fed rate cuts largely drive the disconnect between weakening macro data and strong equity prices, and these cuts will likely support risk assets.

Bottom Line

As Trump’s trade war escalates, markets are likely to remain highly sensitive to policy headlines and economic data. Higher tariffs increase input costs and pressure corporate profit margins. Meanwhile, weak labour numbers and falling industrial activity raise the risk of a broader economic slowdown. However, as long as monetary policy remains accommodative, equities may continue to find support.

The S&P 500 appears poised to move toward the 7000 level after breaking above 6700. The strength of this move will depend on technical momentum and the Federal Reserve’s response to growing economic pressure. Meanwhile, gold (XAU) and other safe-haven assets continue to benefit from persistent uncertainty, even as equities ride the wave of ample liquidity.