Following President Donald Trump’s announcement late Monday that charges against Mexico would be suspended and imposing tariffs on China and Canada, major stock market indices began the week lower.
Early losses were compared to fewer than 100 points by noon on the Dow Jones Industrial Average. While the Nasdaq 100 lost 1%, the S&P 500 fell 0.5%.The Russell 2000, a measure of smaller businesses, had a 0.7% decline. Wall Street’s “fear” barometer for predicting significant market swings, the Cboe Volatility Index, surged above 17.
With a 10% levie on Canadian energy imports, Trump imposed a 25% tariff on all commodities imported from Canada and Mexico, the two biggest trading partners in the United States, on Saturday. A 10% tax on all Chinese-sourced goods was also announced by him. Trump said late Sunday that the tariffs might cause some “pain” for American consumers, but that it would be “worth the price.” On Tuesday, they were supposed to go into effect.
Significant drops were seen in the stock of auto companies, many of which depend on production facilities in Mexico and Canada: Ford’s stock fell as much as 4%, and General Motors’ stock fell as much as 7%.
Chipotle, Nike, Lululemon, and alcohol distributor Constellation Brands were among the other significant consumer companies that went out of business.
Large declines were also seen in Bitcoin and other cryptocurrencies that are still linked to investor risk-taking, but some analysts believe this to be a buying opportunity.
The price of gold reached a record $2,818.27 an ounce.
Products from Canada, such as potatoes, cereals, lumber, and steel, and Mexico, such as fresh vegetables, beer, liquor, and some gadgets, will probably become more expensive to import into the United States.
Regarding the anticipated length of the tariffs, Wall Street analysts couldn’t agree. Researchers at Goldman Sachs said in a note released Sunday that although the outlook was uncertain, the tariffs were “likely to be short-lived” due to the ambiguous wording of the White House’s demands for removing them, which included limiting immigration and fentanyl shipments, as well as the possible economic consequences of a long-term imposition.
According to a another group of Goldman analysts, investors may experience more significant drops in U.S. stocks if they “reassess their assumptions about the risks that the administration is willing to take with the growth and inflation outlook.”
According to J.P. Morgan, Trump might have triggered a fresh wave of volatility.
They noted in a note that it will be difficult to reverse the rise in policy uncertainty, even if tariffs are canceled tomorrow.
Ontario Premier Doug Ford declared early Monday that his government would not be signing new contracts with U.S. companies after Canada and Mexico threatened retaliation measures on U.S. exports.
According to some analysts, the economies of Canada and Mexico are now likely to experience severe slowdowns in growth. Morgan Stanley has predicted that the Mexican economy will enter an outright recession; figures published by Reuters indicate that Mexico exports nearly 83% of its goods to the United States.
The tariffs, according to some GOP leaders, were negotiating ploys. “I believe that these tariffs specifically, Kristen, are meant to bring Canada and Mexico to the table for the fentanyl that is streaming into our communities,” Sen. Eric Schmitt, R-Mo., told Meet the Press moderator Kristen Welker.
The truth is that these nations have been exploiting us while fentanyl is flooding into our nation, he continued. Mexico, then, has an option. They have the option of sticking close to the cartels or trading with the US. It’s quite easy.