Cool CPI doesn’t boost stock — the rally peters out

Remember when inflation readings were the headline news of the day, and were as feverishly anticipated by investors as Nvidia earnings reports? CNBC Daily Open remembers. If Thursday’s consumer price index report, which showed prices actually dipping month on month and core inflation dropping to the lowest since 2021, had been released prior to the tariff chaos unleashed by U.S. President Donald Trump, stocks would probably have shot up.

Instead, the U.S. stock market fell Thursday, as the previous day’s relief rally quickly lost steam. Investor sentiment was weighed further by the White House’s confirmation that it was imposing a 145% tariff on imports from China — 20% higher than previously thought. That basically closes off all trade between the two countries, according to Erica York, vice president of federal tax policy at the Tax Foundation’s Center for Federal Tax Policy.

To be fair, March’s consumer price index report doesn’t take into account price changes resulting from tariff policies. If companies have to pay more than double for goods from China, it’s hard to imagine them — even one with pockets as deep as Apple’s — absorbing the increased cost. The inflation report for April, then, could have an impact as large as any tariff news.  

Short-lived relief rally
U.S. stocks fell Thursday, giving up gains from the previous day’s historic rally, with losses accelerating after the White House confirmed to CNBC on Thursday that the tariff rate on China would actually total 145%. The S&P 500 was down 3.46%, the Dow Jones Industrial Average declined 2.5% and the Nasdaq Composite slumped 4.31%. Asked for his reaction to today’s market sell-off, U.S. President Donald Trump said, “I haven’t seen it,” while Trump’s top trade advisor Peter Navarro told CNN the “retracement” is “no big deal.”

Recession is OK, depression is not
Trump privately said he was aware that his broad and steep plan for levies unveiled last week could tip the economy into a recession, but he didn’t want a depression, according to The Wall Street Journal, citing people familiar with the conversations. A depression is considered by economists to take place when a recession becomes more severe and entails higher unemployment and a more prolonged downturn. 

Lowest core inflation in years
The U.S. consumer price index fell a seasonally adjusted 0.1% in March, putting the 12-month inflation rate at 2.4%, down from 2.8% in February. Core inflation, which excludes food and energy, increased 0.1% for the month and 2.8% on the year. That was the lowest annual rate for core inflation since March 2021. Wall Street had been looking for headline inflation of 2.6% and core at 3%, according to the Dow Jones consensus.

China unlikely to devalue yuan
The Chinese offshore yuan weakened to a record low of 7.4287 against the U.S. dollar earlier this week after the People’s Bank of China set its midpoint rate at its weakest level since 2023. However, China will not be able to wield a weaker yuan as a weapon in its deepening trade war with the U.S. because of concerns that such a move could trigger financial market instability, most market watchers surveyed by CNBC said.

Mixed day in Asia for assets
Asia-Pacific markets were mixed Friday. Japan’s Nikkei 225 lost around 3.4% and South Korea’s Kospi fell 0.7%, but Hong Kong’s Hang Seng Index climbed more than 1.8% and mainland China’s CSI 300 added roughly 0.5%. The price of gold futures hit a fresh high of $3,226 per ounce during Asian trading hours. Bitcoin prices ticked up 1.8% to $80,951.20, paring some overnight losses.

[PRO] Effects of China tariffs on Apple
Trump may have paused tariffs on most of the U.S.’ trading partners, but hiked those on China to a staggering 145%. Apple, which relies on China for an estimated 80% of its production capacity, has seen its stock tumble this week. Analysts are divided over what Apple’s strategy could look like in the future.

How China’s exporters are scrambling to mitigate the impact of punishing U.S. tariffs

U.S. has raised tariffs on Chinese imports to triple digits. For China’s exporters, it means raising prices for Americans while accelerating plans to diversify operations — and, in some cases, stopping shipments entirely.

U.S. consumers could lose access to certain products in June since some American companies have halted their plans to import textiles from China, said Ryan Zhao, director at Jiangsu Green Willow Textile.

Tony Post, CEO of U.S.-based running shoe company Topo Athletic, said he is planning to work more with suppliers based in Vietnam in addition to his existing China suppliers. “I’m going to eventually have to raise prices and I don’t know for sure what impact that is going to have on our business,” Post said. Before Trump started with tariffs, Post predicted nearly $100 million in revenue this year — primarily from the U.S.