DJI: Dow Jones Sheds 200 Points Despite New Tariff Extension for China. Is It Inflation Scaries?

China just got another 90-day pause before Trump’s tariffs hit its goods on the US border. But investors might be bracing for a surprise in the inflation report coming Tuesday.

📉 Wobblying into the Week

• The Dow Jones Industrial Average DJI closed down 200 points, a negative 0.5%, on Monday, joined by a 0.3% slide in both the S&P 500 and the Nasdaq Composite. That’s despite a major geopolitical win in the form of extended trade talks with Beijing.
• The selloff adds to growing jitters for the Dow after this month’s rollercoaster ride. A week ago, the index plunged more than 500 points for Jobs Friday before clawing almost all of it back the coming Monday.
• The mood was cautious rather than cheerful — traders didn’t want to get caught wrong-footed ahead of Tuesday’s July CPI release, one of the most critical inflation reports of the year after a five-month stretch of tariff uncertainty.

🛑 Tariff Pause Buys Time

• President Donald Trump signed an Executive Order granting China another 90-day extension before the next wave of tariffs kicks in — the new deadline is November 9.
• Tariffs on imports from China will remain at 30% for now, avoiding an automatic jump to a higher rate. That’s a relief for industries heavily reliant on Chinese goods, from electronics and appliances to toys and apparel.
• But “pause” doesn’t mean “peace” — the extension simply prolongs the uncertainty. Businesses still face the risk of higher import costs later this year, which could keep supply chains jittery.
• The US brought in about $440 billion worth of goods from China in 2024, meaning even small shifts in tariff policy could ripple across the economy.

💡 Inflation Anxiety Creeps Back

• In immediate news, it’s Inflation Day today. Analysts expect July CPI USCPI to rise again, to 2.8%, raising the stakes for the Fed’s September policy decision. A hotter-than-expected number could embolden Jay Powell and company to keep rates steady — or even push back against rate-cut bets.
• For context, before this week’s data, traders had been pricing in a 92% probability of a September rate cut. If CPI surprises to the upside, that number could shrink quickly.
• The June CPI print landed at a warm 2.7%, with clear evidence that tariffs are feeding price pressures: furniture, sports gear, home appliances, clothing, and toys all jumped in price.

🧐 Why the Market Shrugged It Off

• Tariff relief normally gets an applause rally, but right now, inflation risks outweigh trade news in investors’ minds.
• The pause still leaves tariffs in place at elevated levels — meaning inflationary effects from the trade war are still present.
• Traders are bracing for the possibility that the Fed will prioritize inflation control over growth support, especially if Tuesday’s data undermines the idea that inflation is cooling.