Trade War Deepens: Tariffs Soar, Markets Shaken, Safe Havens Surge

*Tech in the Crosshairs – Despite initial confusion over exemptions, the White House hinted at fresh national security tariffs targeting semiconductors.

*Market Reaction – Gold, Yen, and Swiss Franc surge as investors sought safety, while the Dollar weakened

Market Summary

The tit-for-tat escalation has deepened fears of a prolonged trade war, driving global risk-off sentiment. Confusion over electronics exemptions added to market anxiety, with President Trump asserting that products like smartphones and laptops remain under a 20% fentanyl-related tariff—despite Customs clarifying that several tech items, including semiconductors, are temporarily excluded.

However, uncertainty persists, as the White House signaled upcoming national security measures that may re-target the electronics supply chain. Commerce Secretary Howard Lutnick confirmed that new tariffs, particularly on semiconductors, could be implemented within a month, clouding the outlook for tech firms heavily reliant on Chinese manufacturing. The U.S. Dollar Index slumped after a 90-day tariff pause was granted to non-retaliatory nations, excluding China—an erratic move that further eroded confidence in the administrations trade strategy.

In response to the escalating tensions, safe-haven assets surged. Gold hit multi-year highs, while the Japanese Yen and Swiss Franc gained sharply. Meanwhile, U.S. equities remained volatile, with the S&P 500 down over 10% year-to-date. Tech stocks like Apple and Nvidia saw brief rallies on limited tariff relief, but optimism faded as policy uncertainty lingered.

Current rate hike bets on 7th May Fed interest rate decision: Source: CME Fedwatch Tool

0 bps (85%) VS -25 bps (15%)

Market Movements

DOLLAR_INDX, H4

The U.S. Dollar Index continued its downward trend, pressured by mounting fears of a prolonged trade war and recession risks after President Donald Trump hiked tariffs on China to a record 125%. While China has yet to issue a formal response, markets remain on edge, with investors closely watching for any retaliatory action that could further escalate tensions and weigh on economic growth.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 30, suggesting the index might enter oversold territory.

Resistance level: 102.95, 106.80

Support level: 99.65, 95.85

XAU/USD, H4

Gold prices extended their gains, supported by escalating U.S.-China trade tensions and a weaker-than-expected U.S. CPI report. As the U.S. announced a fresh 145% tariff hike on China, investor demand for safe-haven assets increased. With China yet to respond, markets await a potential bilateral trade meeting this week, which could influence the next leg of golds move.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 72, suggesting the commodity might enter overbought territory.

Resistance level: 3225.00, 3295.00

Support level: 3170.00, 3130.00

USD/JPY, H4:

The Japanese yen extended its gains, with USD/JPY falling amid a stronger-than-expected producer inflation report from Japan. This bolstered expectations of continued monetary tightening by the Bank of Japan, with Governor Kazuo Ueda reaffirming the BOJ‘s commitment to its rate-hike path despite global trade headwinds. The pair remains under pressure as investors digest the BOJ’s hawkish tone.

USD/JPY is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 32, suggesting the pair might extend its losses since the RSI stays below the midline.

Resistance level: 144.15, 147.40

Support level: 140.65, 137.45