U.S. stock markets experienced declines and stock futures fell on Friday, May 30, 2025, following accusations by President Donald Trump that China had "totally violated" its preliminary trade agreement with the United States. President Trump asserted in a social media post on Truth Social that China had reneged on a deal designed to pause retaliatory tariffs. He suggested he would take action in response, stating, "So much for being Mr. NICE GUY!"

Trump elaborated on his position, claiming that two weeks prior, China was in "grave economic danger" due to the high tariffs he had imposed, making it "virtually impossible for China to TRADE into the United States marketplace." He stated he made a "FAST DEAL" with China to prevent a bad situation for them, which led to stabilization and China returning to business. However, he then accused China of violating this agreement. This development came two days after President Trump criticized CNBC reporter Megan Cassella regarding the term "TACO trade," which implies Trump often backs down from tariff threats.

U.S. officials echoed the President's concerns. U.S. Trade Representative Jamieson Greer stated in a CNBC interview, "we're very concerned with" China's purported non-compliance, accusing the Chinese of "slow rolling their compliance," which he deemed "completely unacceptable and has to be addressed." Treasury Secretary Scott Bessent, in a Fox News interview, noted that trade talks with China "are a bit stalled," further discouraging traders hopeful for progress.

The backdrop to these tensions was an agreement reached on May 12, where the U.S. and China consented to a 90-day suspension of most tariffs on each other's imports. This truce had followed a period of escalating tariffs initiated by Trump, with China retaliating in kind. The new accusations signaled a potential unraveling of this temporary de-escalation.

The market reaction was swift. Minutes into trading on Friday, all three major U.S. stock indexes fell. The Dow Jones Industrial Average retreated 0.4 percent to 42,068.66, the S&P 500 Index lost 0.4 percent to 5,888.83, and the tech-focused Nasdaq Composite Index slid 0.5 percent to 19,090.33. Stock futures had also indicated a lower opening earlier. Christopher Low of FHN Financial highlighted the significance of the U.S.-China trade relationship, stating, "the China situation is the one that makes or breaks the US economy."

Despite data showing that U.S. inflation, measured by the Personal Consumption Expenditures (PCE) price index, cooled more than expected in the previous month (rising 2.1% year-on-year, down from 2.3% in March), this positive news was overshadowed by the trade concerns. Experts warned of severe economic consequences if trade tensions re-escalate. Low cautioned that if the two largest economies revert to triple-digit tariff levels, the U.S. and global economy "will almost certainly see a recession," which would have "huge implications for corporate profits."

Adding to the economic uncertainty were ongoing legal challenges to Trump's tariffs. The Trump administration was reportedly considering using the Trade Act of 1974 as an alternative legal route to impose 15% tariffs for 150 days, following a U.S. court ruling that briefly halted most tariffs before an appeals court issued a temporary stay, allowing them to remain through the following week. This legal back-and-forth contributed to market volatility.

Despite these immediate pressures and growing fears of an economic slowdown or recession, major U.S. stock indexes were reportedly on track for a strong May. The S&P 500 had climbed over 6%, the Nasdaq Composite surged 10%, and the Dow Jones gained around 4% for the month. However, market analyst Ed Clissold of Ned Davis Research noted that while there was "good momentum heading into summer," hard economic data might soon reflect underlying weaknesses as Q3 approaches. Trading on Friday was also potentially subject to pressure from U.S. pension fund rebalancing, with Goldman Sachs estimating around $20 billion in equity sales.

Amidst the broader market movements, some individual stocks saw significant changes. Gap Inc. (GPS) shares plunged over 17% in premarket trading after the retailer issued a weaker-than-expected Q2 outlook. Conversely, Ulta Beauty (ULTA) stock soared 7% following strong earnings and sales growth. Dell Technologies (DELL) gained 1.7% premarket due to better-than-expected first-quarter revenue, driven by enterprise services and AI-related products.

Investors remained cautious, closely monitoring developments in U.S.-China trade negotiations, the fallout from Trump's tariff threats, and upcoming inflation data, including the PCE index, for signals on the Federal Reserve's future policy moves. The markets were expected to remain choppy as clarity was sought on both international trade policy and domestic inflation trends.