Tech’s strong ad sales are showing signs of cracking from Trump’s trade war

Key Takeaways:

• U.S. Markets Decline Ahead of Trade Discussions: Major indices fell as investors anticipate the outcome of U.S.-China trade talks this weekend.
• President Trump Signals Potential Tariff Changes: Trump suggests an 80% tariff on China, indicating a possible shift in trade policy.
• U.S.-U.K. Trade Agreement Sparks Optimism: A preliminary deal with the U.K. may serve as a model for future international agreements.
• Analysts Express Economic Concerns: Experts warn that tariffs could lead to higher inflation and slower economic growth.
• China’s Exports Surge Despite Tariffs: China’s unexpected export growth challenges expectations amid trade tensions.

Markets React Ahead of High-Stakes Trade Talks

Stocks traded lower on Friday as investors awaited the much-anticipated trade discussions between U.S. and Chinese officials set to take place over the weekend. The S&P 500 edged down by 0.1%, the Dow Jones Industrial Average lost 153 points, or 0.4%, and the Nasdaq Composite slipped about 0.1%.

Market sentiment had improved earlier in the week following the preliminary trade agreement between the U.S. and the United Kingdom. Traders are hopeful that the U.K. deal will establish a framework for the U.S. to secure more agreements with major nations, even though a 10% tariff rate on the U.K. appears to be the global baseline.

Trump’s Tariff Declarations Stir Uncertainty

“Many Trade Deals in the hopper, all good (GREAT!) ones!” President Donald Trump proclaimed on Truth Social, a day after announcing the U.K. trade agreement—the first such deal since his “reciprocal” tariff announcement in early April.

In another post, Trump wrote that an “80% Tariff on China seems right,” ahead of the upcoming talks led by Treasury Secretary Scott Bessent with Chinese counterparts in Switzerland. While this suggests a de-escalation from the current 145% tariff on China, it’s still higher than many anticipated. Earlier reports from Bloomberg News hinted that the rate could be lowered below 60% as soon as this week. It’s unclear whether Trump refers to a long-term tariff rate or a temporary measure during negotiations.

Analysts Weigh In on Trade Developments

“While trade with the U.K. pales in comparison to trade with our neighbors to the North and South, and especially in comparison to China, it is an important test case and a model for what could be accomplished,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “If the administration can follow this up with additional agreements, it would go a long way toward healing a stock market that has been battered and bruised this year.”

However, not all analysts are optimistic. Goldman Sachs cautions that trade tensions may not ease for every country despite recent developments. “While we do not expect the ‘Liberation Day’ tariff rates to take effect at the end of the 90-day pause, it appears increasingly likely that some, if not most, trading partners will soon face a renewed threat that country-specific rates will take effect,” the firm’s economic research team noted.

Similarly, Barclays’ Emmanuel Cau suggested that investors should remain attentive to President Trump’s actions. “A lot is baked in, but the ‘don’t fight Trump’ mantra may still prevail so long as there is a path towards more deals and less tariffs,” he said.

Economic Concerns and Inflation Worries

Federal Reserve Governor Michael Barr warned that the tariffs could lead to higher prices and reduced economic growth later in the year. “In my view, higher tariffs could lead to disruption to global supply chains and create persistent upward pressure on inflation,” Barr stated. “I am equally concerned that tariffs will lead to higher unemployment as the economy slows.”

Individual Stocks See Mixed Results

Amid the broader market declines, some companies experienced significant stock movements:

• Lyft shares jumped more than 20% after the company increased its share buyback plan and reported better-than-expected gross bookings. CEO David Risher expressed confidence, stating the company isn’t seeing “anything to worry about” despite concerns over a slowing consumer market.
• Insulet , a medical device company, surged over 19% following first-quarter results that surpassed estimates on both top and bottom lines. The company also raised its full-year revenue growth guidance.
• Expedia saw its shares decline by 7% due to lower-than-expected first-quarter revenue and soft forward guidance, despite beating earnings estimates.
• Affirm , a buy now, pay later firm, tumbled 13% after issuing revenue guidance that fell short of analyst expectations.

China’s Export Surge Defies Expectations

In a surprising turn, China’s exports jumped 8.1% in April from a year earlier, significantly beating Reuters’ poll estimates of a 1.9% rise. This surge occurred even as businesses faced the impact of U.S. tariffs that increased last month. Imports, meanwhile, dipped by only 0.2%, a slower decline than anticipated.

Looking Ahead

As the week concludes, the S&P 500 is on pace for a 0.7% loss, the Nasdaq is set to lose about 0.6%, and the Dow is down roughly 0.2%. Investors will be closely monitoring the outcomes of the U.S.-China trade talks, with the hope that constructive negotiations could alleviate market uncertainties and set a positive tone for global trade relations.