US President Donald Trump raised the ante in trade negotiations with China, instructing the United States Trade Representative (USTR) to consider another US$100 billion of “additional traiffs” on Chinese imports. Most market commentators have assumed this to mean tariffs on an additional US$100 billion worth of Chinese goods, and not $100 billion additional tariffs that would be collected (which would mean a significant increase in the value of Chinese goods that would be slapped with the trade tax).

This latest development could just be a negotiation tactic, but it raises the stakes. To the markets it means a period of greater uncertainty given the wider range of more detrimental potential outcomes with respect to global trade. Recall the first round of US tariffs on US $50 billion worth of Chinese goods is subject to a public comment period that has a public hearing scheduled for 15 May. This implies a decision on the tariffs will likely not be made until late May/early June. Beneath the media noise, the US and the Chinese may be using this time to hammer out some pretty tough negotiations. Unfortuntately for the markets, headline risks on trade war is likely to persist in the meantime.

On the economic data front, the US ISM manufacturing index fell by more than expected, albeit still at a solid 59.3 reading for the month of March. The ISM non-manufacturing index fell less than expected and stands at 58.8. Friday’s non-farm payroll numbers was more eye-catching, posting a +103k reading for March when the market was looking for +185k. Weather was quoted to be a contributing factor for the big miss. The unemployment rate was unchanged at 4.1%. On a more encouraging note, wage growth rebounded with average hourly earnings up 0.30% (m/m) in March and the y/y rate rose by 0.1%-points to 2.7%.

Outside of the US, Europe’s final manufacturing PMI numbers were in line with the flash estimate of 56.6, posting little surprise. The decline from 58.6 in February were again attributed to weather. In China, PMI data was mixed with the Caixin manufacturing PMI falling to 51 in March (from 51.6 in February), while the official manufacturing PMI posted a strong rebound. Services PMI was softer for both the Caixin and official surveys. Overall, March PMI data suggests global growth momentum has eased, though weather effects is clearly in the mix. Fundamentally, we can’t read too much into a single month’s data point. But for sentiment, softer economic data even for a single month could be dicey given that investors already have a lot of other things to worry about.