Stock futures dropped early Monday amid renewed trade tensions between the U.S. and China. China rejected U.S. accusations that it violated the Geneva trade agreement, instead blaming Washington for failing to uphold the deal. This exchange signals a worsening outlook for negotiations between the world’s two largest economies.
The recent tensions follow a brief lull after a meeting in Geneva between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, where they agreed to suspend most tariffs for 90 days.
As of Monday morning, S&P 500 futures were down 0.53%, Nasdaq-100 futures declined 0.68%, and Dow Jones Industrial Average futures dropped by 174 points, or 0.41%.
National Economic Council Director Kevin Hassett indicated on Sunday that Presidents Donald Trump and Xi Jinping might engage in trade talks as early as this week, though no official date has been set.
Last week, the S&P 500 closed May with over a 6% gain—the strongest monthly performance since November 2023. The Nasdaq Composite soared more than 9%, and the Dow Jones Industrial Average climbed approximately 4% for the month.
Despite the strong gains, Morgan Stanley’s Managing Director Chris Toomey remains cautious. Speaking on CNBC’s Closing Bell on Friday, Toomey said, “We’re probably still range-bound. The concern is that while we may have avoided the worst-case tariff scenarios, the market may be pricing in the best-case.”
He added that the market appears to be factoring in the possibility of 10% tariffs across the board and up to 30% tariffs on China, saying, “That’s kind of baked in.”
Meanwhile, the legal status of President Trump’s tariffs remains uncertain. The U.S. Court of International Trade recently struck down many of the steep tariffs, ordering the administration to cease collecting them. However, a federal appeals court swiftly granted a temporary pause on that ruling, reinstating the duties for now.
Despite the legal challenges, Trump’s economic advisors remain confident the tariffs will persist. Commerce Secretary Howard Lutnick told Fox News over the weekend that “the tariffs are not going away,” while Hassett expressed optimism on ABC News, stating he is “very confident that the judges will uphold this law.”
Tensions heated further last Friday when Trump posted on Truth Social that China has “TOTALLY VIOLATED ITS AGREEMENT WITH US.” He also announced plans to double tariffs on steel imports to 50%, effective Wednesday, addressing U.S. steelworkers in a separate event.
Investors are now awaiting several economic reports due this week, including the key May nonfarm payrolls data on Friday, which may shed light on how tariffs are impacting the U.S. economy.
