US President Donald Trump's threat to significantly increase duties on imports of Chinese goods has sharply increased the level of fear in the stock market. The VIX volatility index, also known as the fear index, soared 35% to 22.18 points during trading.

This indicator reflects market expectations about the volatility of the S&P 500 Index over the next 30 days. As a rule, stocks fall when the VIX rises, and vice versa. The level of 20 is considered psychologically important for the VIX: if the index lingers in the range of 20-21 points, it may be a signal that a prolonged period of increased volatility is approaching, Barron's writes, citing Bensignor Investment Strategies strategist Rick Bensignor.

During the April sell-off triggered by Trump's decision to start a trade war, the "fear index" jumped above 60. Later, as the U.S. began making trade deals and lowering duties, the index pulled back from peak levels. According to trading data, the last time the VIX index climbed above 20 was in early August. Back then, investors sold off U.S. stocks amid weak labor market data, disappointing reports including Amazon and Trump's executive order to impose duties of up to 41% on various U.S. trading partners.

The sell-off on Oct. 9 was sparked by Trump's announcement that he threatened China with higher duties in response to tighter export controls on rare earth metals, on which high-tech products including weapons systems, robotics, electric vehicles and electronics depend. Beijing maintains a dominant position in the global rare earth supply chain, while the U.S. remains dependent on Chinese imports, CNBC noted.

This article was AI-translated and verified by a human editor

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