Trump, China Trade Threats Have Roiled Stocks. Markets Should Focus on This Instead.

(TIMOTHY A. CLARY/AFP via Getty Images)

It’s time to ignore the noise. Stock markets are swinging on each new salvo of trade threats between the U.S. and China, but Federal Reserve Chair Jerome Powell’s comments and bank earnings are a more important sign for the bull market.

Rare earth minerals, soybeans, and cooking oil have all briefly been on investors’ radars as President Donald Trump and China’s leader Xi Jinping scramble for leverage in negotiations. But even as Wall Street’s “fear gauge”—the Cboe Volatility Index (VIX)—spikes, the underlying signs show the American economy is resilient and the Fed is ready to act. Even permanent pessimist Jamie Dimon acknowledged tariffs hadn’t hit as hard as expected, in the JPMorgan CEO’s call with reporters amid a healthy slate of big bank earnings.

While Wall Street and Main Street’s finances don’t always go in the same direction, relatively low losses on bank loans suggest consumers aren’t feeling the pinch yet—just ask luxury-goods company LVMH, which swung to growth for the first time this year and cited steady American demand. The International Monetary Fund agrees, raising its projection for U.S. growth to 1.9% this year from 1.7% previously.

The one concern Dimon did point to was slowing jobs growth. But that’s where Powell steps in—the central banker gave every indication the Fed will keep cutting rates this month and beyond to address a weakening labor market, in comments at an economics conference in Philadelphia on Tuesday. That should provide some comfort that the stock market rally has further to go.

It’s perhaps no surprise that markets are jumpy amid a government shutdown that is delaying data releases and with the world’s two largest economies threatening a trade war. But sometimes it’s best just to put in the earplugs and focus on the positive.

—Adam Clark

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Fed’s Powell Sees Its Focus Shift to Labor Market

Federal Reserve Chair Jerome Powell signaled he sees more room for further interest rate cuts, citing downward pressure on the labor market. That’s in line with the majority of Fed officials, who have called for two more rate cuts this year split between the October and December meetings.

• The economy is on a firmer than expected trajectory, Powell told the National Association for Business Economics. But the downside risks to employment are rising. While government data has been held up by the shutdown, Powell said the available data show that not much has changed since the Fed’s last meeting.
• Stubbornly higher-than-target inflation is likely because of tariffs and not any broader pressures, he said. Long-term expectations, he said, still remain in line with the Fed’s target. It’s Powell’s first major public appearance since the September meeting, when deep divisions within the policy panel were exposed.
• Rising employment risks means the Fed is pulling some of its focus away from inflation. Powell also indicated that the Federal Reserve may stop shrinking its $6.6 trillion balance sheet in the next few months.
• Powell’s term as Chair ends next May. The prediction market Kalshi has National Economic Council director Kevin Hassett at a 41% chance of succeeding him, making him the leading contender. Two others, Kevin Warsh, a former Fed governor, and current Fed governor Christopher Waller, are at 17% and 15%, respectively.

What’s Next: Warsh wants to significantly reduce the Fed’s balance sheet and has said he plans to give Treasury Secretary Scott Bessent a large share of the responsibility for how and when balance sheet reductions happen, a significant policy shift that could weaken the Fed’s longstanding independence.

— Nicole Goodkind

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Trump’s Latest China Trade War Threat: Cooking Oil

President Donald Trump opened a new front in the escalating trade war with China. Seeking retribution for China’s decision not to buy American soybeans, which has hit farmers hard, Trump said his administration is considering terminating business with China having to do with cooking oil.

• Trump called China’s soybean boycott an “economically hostile act” and said the U.S. doesn’t need to buy cooking oil, it can make its own. While the latest threat seems puzzling, Veda Partners’ Henrietta Treyz sees a shift by the U.S. away from broad tariffs toward soy-specific items.
• U.S. and China officials have been trying to diffuse some of the tension. U.S. Trade Representative Jamieson Greer told CNBC earlier Tuesday that senior level officials from both sides met this week and that Trump and Chinese leader Xi Jinping are still scheduled to meet on the sidelines of a conference in Korea.
• But Greer said Trump’s threat of another 100% tariffs on Chinese imports starting Nov. 1 still stands, blaming China for its unexpected export controls on rare earths. The tentative agreement was that “we would keep our tariffs low if you keep the rare earths flowing,” he said.
• China’s Ministry of Commerce said if forced to fight, China will “fight to the end,” but that the door is always open to talking. The S&P 500 , which had been temporarily relieved after an apparent thawing in tensions, ended Tuesday in negative territory after Trump posted his cooking oil threat.

What’s Next: Trump isn’t limiting his trade hostilities to China. During comments to reporters on Tuesday, Trump floated the prospects of levying tariffs on Spain because he told reporters he was unhappy that the NATO member wasn’t raising its military spending to 5% of GDP.

— Reshma Kapadia and Janet H. Cho

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ASML Revenue Missed But It’s Still a Hot AI Play

ASML posted confident guidance that bodes well for the current artificial-intelligence rally driving stock markets, ahead of upcoming Alphabet, Microsoft, Meta, Intel and other tech earnings.

• The Dutch chip-making equipment company reiterated its 2025 growth expectations and said it doesn’t expect its 2026 sales to be below this year’s level. In its previous earnings announcement, ASML said it expected 15% sales growth this year but tariff uncertainty meant it couldn’t guarantee growth in 2026.
• The upbeat forecast came amid mixed earnings on Wednesday, as profit beat expectations but revenue came in below forecasts.
• The company’s American depositary receipts (ADRs) have been on an impressive run lately, surging more than 30% from their level at the start of September.
• It wasn’t just the tech space that provided positive earnings. After several quarters of notching year-over-year sales declines, LVMH Moët Hennessy Louis Vuitton is growing again, providing a glimmer of hope for the hard-pressed luxury sector.

What’s Next: ASML’s earnings show it is well placed to benefit from the boom in AI chips. Rising orders for its lithography machines—which can take 12-18 months to produce and are crucial for manufacturing advanced AI processors—suggest chip companies are anticipating a long-lasting surge in demand.

— Adam Clark and Elsa Ohlen

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Stellantis’ Plan to Cut Imports: A $15 Billion U.S. Investment

Add Stellantis to the growing list of companies announcing manufacturing spending in the U.S., which will have the effect of reducing imports. The Chrysler and Jeep parent said it will spend $13 billion to expand U.S. production by 50%, and introduce five new vehicles in the market.

• Stellantis sold about 1.3 million vehicles to Americans in 2024. Roughly 600,000 were imported from Mexico and other countries. Those are subject to President Trump’s tariffs, raising costs for all auto makers, including Stellantis.
• The spending will also help renew Stellantis’ product lineup. U.S. sales declined 15% in 2024, and through September, Stellantis’ U.S. sales were off another 17% from a year ago. The plan spans four years, but should result in 5,000 new jobs for Ohio, Michigan, and other states.
• Stellantis said the investment in the U.S. was the largest in its history. The auto maker got a new CEO in June, Antonio Filosa, taking over from former CEO Carlos Tavares who left in December amid flagging sales and elevated dealer inventories.
• Separately, General Motors announced a $1.6 billion special charge that will hit third-quarter income. The auto maker said it was doing a planned strategic realignment of its electric vehicle capacity and manufacturing footprint. Consumer demand for EVs hasn’t lived up to plans made years ago.

What’s Next: For Stellantis, falling profitability has weighed on investor sentiment. Two years ago, Stellantis generated about $24 billion in operating profit, but it only generated about $4 billion last year. Wall Street projects about $2.5 billion for 2025 before rising to $7 billion in 2026.

— Al Root

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Economics Nobel Prizes Nod to Future of AI, Innovation

The Royal Swedish Academy of Sciences was likely thinking about artificial intelligence and all the ways it is disrupting technology when they awarded the Nobel Prize in economics to Joel Mokyr, Philippe Aghion, and Peter Howitt this week. The latest award is all about understanding new technologies.

• Their work on the economics of technological innovation is foundational to understanding how AI could change the economic landscape. Private investors are counting on this AI disruption; they have funded AI start-ups with $259 billion since 2024, according to Crunchbase.
• Aghion and Howitt described the “creative destruction” of moments like today, when technological innovations undermine the advantages of incumbent companies and enable new companies to steal their business. The U.S. has a particularly dynamic economy, with high rates of job and firm creation and destruction.
• Similar to how mainframe computers were disrupted by PCs, which were disrupted by the World Wide Web, which was disrupted by smartphones, Big Tech companies are defending their turf from challengers and spending hundreds of billions to stave off irrelevance in the AI age.
• Aghion and Howitt identified seven ingredients that enable the innovation flywheel: a balanced competition, patent protection that doesn’t go too far, support for higher education, finance innovation, countercyclical fiscal policy, open trade, and productive bankruptcy laws that efficiently reallocate capital and labor.

What’s Next: A few ingredients on their list are being challenged by Trump administration policies, but most of America’s innovation framework remains in place. The continued upheaval among tech businesses means many companies might not be on anyone’s radar, and some might not exist yet.

— Adam Levine and Janet H. Cho

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Dear Quentin,

I had a career as an economist and financial analyst in the commercial banking area. I retired at the age of 70, and then I started my own tax-preparation and representation firm because I enjoy working with people and helping them resolve their challenging tax issues. My annual revenue is approximately $60,000 before taxes. I’m now 77. I have approximately $565,000 in an IRA, $250,000 in a Roth IRA, $435,000 in a brokerage account, and $189,000 in a 4.3% high-yield savings account.

I also have a $310,000 mortgage balance with 10 years remaining on a 15-year, 3% mortgage. The PITI payment plus HOA fees are about $3,750. I receive $4,400 from Social Security and a small retirement payment, which together make a monthly income of $5,000, excluding the interest from my monthly savings account. When I add all the other expenses like medical, food, utilities, gasoline, insurance and the like, my monthly income doesn’t cover them. So, I rely on what my business generates to fill the gaps.

The current administration’s policies and uncertainties have taken a big bite out of my nest egg. I keep hearing about holding tight and, frankly, I don’t know how to rationalize this market. I wonder if it makes sense to pull money from the IRA to pay off the mortgage before the market erodes further. That would put an extra $2,800 a month in my pocket. When I refinanced to a 15-year low-rate mortgage, my investments were earning more than the interest on the mortgage. Now, however, that is going in reverse.

What do you think?

— Septuagenarian Investor

Read the Moneyist’s response here.

— Quentin Fottrell

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner