The US stock market experienced downticks on Tuesday, reacting to President Donald Trump’s latest round of tariffs on Mexico and Canada. The move erased the market’s post-US election gains in November 2024 and sent major indices on Wall Street into a downward tailspin, with global markets in Asia and Europe following suit.
Wall Street opened markets in the red yesterday as investors weighed the consequences of escalating trade tensions. The Dow Jones Industrial Average plunged 800 points in early Asian trading hours, made a brief recovery, but ended the day down 1.55%, at 42,521. The S&P 500 shed 1.22%, while the Nasdaq Composite fell 0.35% after dipping into correction territory.
According to Yahoo Business, Wednesday pre-market trading shows US stock market indices have seen meager gains, with only the Russell 2000 index getting close to a 1% uptick since the markets closed on March 4.
In Europe, the STOXX 600 is up 1.28%, regaining some of yesterday’s losses, while Germany’s DAX also went up by 3.27%. Asia’s Japan’s Nikkei 225 lost 0.8%, but Hong Kong’s Hang Seng shot up by 2.84%.
“The fact that we’ve had a pretty big and speedy bounce is yet another sign that, for many active traders, the mindset is ‘buy dips,’” chief strategist at Interactive Brokers Steve Sosnick noted.
Trade war escalates after retaliations
The stock market’s plummet came against the backdrop of a series of retaliatory moves from US trading partners affected by Trump’s tariffs.
In response to US tariffs that went into action this week, Minister of Finance Dominic LeBlanc announced that Canada has imposed 25% duties on billions of dollars in American imports.
“Canada is being needlessly and unfairly targeted by these tariffs – and the U.S.’s decision leaves us with no choice but to respond to protect Canadian interests, workers and businesses. Working with provincial, territorial and industry partners, our singular focus is to get these tariffs removed as quickly as possible,” LeBlanc said in his statement.
Mexico and China also followed suit, implementing 25% tariffs on American goods and new duties of up to 15%, targeting US agricultural exports.
For corporate America, Trump’s economic policies that involve tax cuts and regulatory rollbacks have been largely welcomed by businesses. Still, many executives fear that the new trade barriers caused by tariffs could nerf the benefits of any of the president’s pro-business policies.
The White House has portrayed the tariffs as a strategic sacrifice, a necessary step in making sure the US and its currency lead global markets. Economists see the administration’s approach as a chess move, where short-term pain is a small price to pay for long-term gain. They also do not expect President Trump to fall back from his trading policies, no matter the cost.
“Next to tax cuts and more lenient regulations, sure, the levies are an unsavory part of the equation,” one industry executive remarked. “But they’ll still be better off under Trump’s broader economic plan when all is said and done.”
Wall Street feels echoes of a global economic crisis
Since Washington first spoke about trade tariffs, global economic experts have repeatedly sounded the alarm over the consequences of Trump’s strategy. Andrew Wilson, deputy secretary-general of the International Chamber of Commerce, cautioned that the situation risks driving markets into a fall reminiscent of the Great Depression.
“Our deep concern is that this could be the start of a downward spiral that puts us in 1930s trade-war territory,” Wilson said in an interview with The Wall Street Journal.
He also mentioned the infamous Smoot-Hawley Tariff Act, which imposed steep duties on foreign imports and contributed to a worldwide economic collapse. According to research from the International Monetary Fund, that downturn led to mass unemployment, with nearly a third of the global workforce left without jobs.
“The likelihood of a similarly severe blow to the global economy is high,” Wilson said. “Right now, it’s a coin flip. It comes down to whether the U.S. administration is willing to rethink the utility of tariffs.”
Neil Shearing of Capital Economics believes Trump’s trade war risks driving a wedge between the US and its allies, which could muddle any efforts for America to counter China’s growing economic influence.
“The Trump tariffs risk widening a fissure within the group of nations largely aligned with Washington, complicating collective action against an emboldened Beijing and isolating the US on the global stage,” he wrote in a research note published Tuesday.
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Source: https://www.cryptopolitan.com/wall-street-delivers-judgment-trump-policy/