The investors in the market are naive and short-sighted. Trump said trade wars are short and easy to win. Clearly not the case with China. And probably far from easy with the EU as well. Trump simply can't bully China or the EU the way he can with Mexico or Canada.
I remember most so-called experts in politics, economics, investment banking and consultancies all said the trade war will end relatively quickly as it was in the interest of both sides to find a solution to avoid damage to both economies. Yet here we are more than a year later with no end in sight.
They failed to realize once a trade war gets going, it can take on a logic and momentum of it's own beyond the rational interest of its players. It's a vicious cycle where both sides can't climb down because of the risk of political damage this will do. So Trump piles on the pressure hoping China will cave, yet China becomes ever more defiant and rigid in response, because they can't be seen caving to the US bully.
So now we get warnings of an impending recession in the US with the inverted yield curve. We'll see if US gets one, but it is clear Trump is facing increasing pressure and feels like he is stuck in a corner, as his increasingly outlandish remarks and threats suggest.
Personally, I hope this will all explode in Trump's face, trouble is, he will destroy countless livelihoods with him. But even then, I bet his base will still vote for him. They will lose their jobs, forced to take lower paying ones, can't pay mortgage and so on, yet will still believe the kool-aid from Trump. Reason and rationality is not after all an attribute for a big chunk of Americans...