Stock Futures flat on lingering Trump trade war uncertainty

 

Wall Street is now expecting Trump-Xi call and de-escalation of trade. Tech and Cold War between US and China

US stock futures fell on June 3, 2025, with S&P 500 contracts dropping 0.4%, reflecting investor concerns over the Trump administration’s trade policies. The OECD’s latest Economic Outlook released the same day, slashed global growth forecasts from 3.3% to 2.9% for 2025 and 2026, citing heightened trade barriers and policy uncertainty. The US economy is projected to slow significantly, with GDP growth expected at 1.6% in 2025, down from 2.8% in 2024, due to tariffs disrupting global commerce, raising consumer costs, and dampening business investment. Inflation is also expected to rise, with US headline inflation projected at 3.2% in 2025, up from 2.8%, potentially forcing the Federal Reserve to maintain higher interest rates.

The OECD highlighted severe impacts on Canada and Mexico, with Canada’s growth cut to 0.7% and Mexico facing a 1.3% GDP contraction in 2025, driven by 25% US tariffs on their imports. A broader trade war, with 10% blanket tariffs on all US imports and retaliatory measures, could further reduce global growth by 0.3% and raise inflation by 0.4% over three years. Despite a temporary US-China tariff truce and a 90-day tariff pause with the EU until July 9, uncertainty persists, contributing to market volatility.

On Monday, June 2, 2025, US stock markets started the month with modest gains despite escalating global trade tensions. The S&P 500 climbed 0.4%, the Nasdaq advanced 0.7%, and the Dow Jones Industrial Average rose 35 points, according to market reports. These gains came amid renewed US-China trade friction, with Beijing rejecting US claims of violating a tariff truce and pointing the finger back at Washington. Investors are closely monitoring a potential call between President Trump and President Xi Jinping this week, which could clarify the trajectory of US-China trade relations.

Trump’s proposal to double steel and aluminum tariffs to 50% sparked significant market reactions. The EU, a key trading partner, criticized the move as undermining ongoing tariff negotiations, which are critical ahead of the July 9 deadline for a potential deal. Steel stocks soared, with Nucor gaining 10.1%, Steel Dynamics up 10.3%, and Cleveland-Cliffs jumping 23.2%, driven by expectations of reduced foreign competition. Conversely, automakers like Ford and General Motors each dropped 3.8%, reflecting concerns over higher input costs and potential retaliatory tariffs. Tesla slipped 1.1% after reporting weaker May sales in Europe, where trade barriers and competition are intensifying.

US manufacturing data, released Monday, showed continued contraction, with the ISM Manufacturing PMI at 48.7, below the 50 threshold for growth. This aligns with the OECD’s warning of slowing global growth due to trade barriers, projecting US GDP at 1.6% for 2025. Investors are now focused on the upcoming May jobs report, expected later this week, for insights into how trade policies are affecting employment and economic activity. The combination of tariff-driven market volatility, sector-specific impacts, and weaker economic indicators underscores the fragile balance markets are navigating amid Trump’s trade agenda.

Ashish Ghosh is a NCFM certified research analyst for the global and Indian financial markets. With more than 15 years of experience in the capital market, Ashish has been published in high-profile online media regularly. He holds a B.Sc. in Math along with NCFM certification for Technical and Fundamental analysis. Presently, he is working with iForex as a financial analyst/content writer since 2017, analyzing mainly the global and Indian markets. You can reach him for professional levels trading ideas or signals through Gmail/telegram ID: ashishghoshjpg/asisjpg

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