New tariffs announced in China during government shutdown and debate over AI valuation are a ‘perfect storm,’ says leading economist

A possible resumption of the trade war risks a resurgence of market uncertainty, Torsten Slok, chief economist at Apollo Global Management, said on Fox Business on Saturday, as fears of an AI bubble raise doubts about stock valuations and the federal government shutdown looks like it could last through October.

“It was almost the perfect storm developing,” he warned.

Separately, the White House Budget Office said Friday that mass layoffs of federal employees have begun 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 are becoming more accustomed to the idea that “the worst may be behind us.”

The Liberation Day announcement wiped more than $6.6 trillion from the U.S. stock market in two days. The S&P 500 suffered its biggest two-day loss on record.

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

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

It takes time for companies to incorporate them into tariffs, Slok said, but the effects of another wave of tariffs are on the horizon.

“The same thing should be expected, namely higher inflation and also downward pressure on GDP,” Slok said.