New China tariffs announced during government shutdown and AI valuation debate are a ‘perfect storm coming together,’ top economist says

A potentially renewed trade war risks a resurgence of uncertainty in the market, Apollo Global Management chief economist Torsten Slok said Saturday on Fox Business, all while fears of an AI bubble raise doubts about stock valuations and the federal government shutdown looks like it may last throughout October.

“This was almost the perfect storm coming together,” he warned.

Meanwhile, White House budget office said Friday that mass firings of federal workers have started and could total more than 4,000.

Slok pointed out that “Liberation Day,” when investors were shocked in April by Trump’s aggressive tariffs, was just over six months ago, and markets have been getting more used to the idea that “maybe the worst was behind us.” 

The Liberation Day announcement wiped out over $6.6 trillion in value from the U.S. stock market within two days. The S&P 500 experienced its largest two-day loss on record.

Now, Trump’s Friday announcement, which includes plans to increase tariffs on China to 130% and impose U.S. software export controls next month, comes as a “surprise,” Slok said on Saturday. The tariff hike threat comes after months of seemingly reduced trade tensions between the countries.

Following Trump’s announcement, the S&P 500 fell 2.7%, its worst day since April 10, the Dow Jones Industrial Average dropped 878 points, about 1.9%, and the Nasdaq sank 3.6%.

Tariffs take time for companies to incorporate them, Slok said, but the effects of another wave of tariffs will be on the horizon.

“You should expect the same, namely, higher inflation and also downward pressure on GDP,” Slok said.