Trump tariffs shake global markets, stocks and sectors hit
U.S. stock markets are reacting to the 25-percent tariffs imposed by Donald Trump on goods from Mexico and Canada and 10-percent on imports from China. Although the major indices have started to regain losses, their progress is notably slow.
On Tuesday morning Eastern Time, stock indices across the ocean recorded significant declines. The S&P 500 index lost 1.69 percent, reaching 5,938.20 points. The Dow Jones dropped by 1.4 percent to 43,920.25 points, and the technology-heavy Nasdaq declined by 2.16 percent to 19,203.79 points. The yield on 10-year U.S. Treasury bonds decreased to 4.498 percent.
The reason is the decisions made by the U.S. president. Donald Trump has instituted 25-percent tariffs on most goods from Canada and Mexico, with the exception of Canadian oil, which is subject to a 10-percent tariff. Goods from China are subject to 10-percent tariffs. The U.S. president argues that "the decision is aimed at protecting Americans from the threat of illegal immigrants and deadly drugs, including fentanyl."
On Tuesday afternoon Eastern Time, an announcement was made about the suspension of tariffs on Mexican goods. This information clearly improved investors' moods, but the indices are just beginning to recover their losses. Almost the entire trading day remains for markets in the U.S.
Impact on the Global Economy
According to economists from Oxford Economics, the new tariffs could significantly impact global economic growth in 2025. Ryan Sweet predicts that some sectors will receive exemptions, including building materials and transport equipment. Despite this, it is estimated that the tariffs will reduce U.S. economic growth by 0.7 percentage points.
Michael Feroli from JP Morgan notes that the impact of tariffs on inflation will depend on their duration, the effectiveness of their collection, and the response of global financial markets.
Consequences for Financial Markets
Paul Ashworth from Capital Economics believes that "inflation in the U.S. will rise faster and higher than initially expected." Economists predict that in this situation, the Federal Reserve will hold off on cutting interest rates for the next 12-18 months.
The automotive sector is feeling the particularly strong effects of the new tariffs. Shares of General Motors fell by 4.89 percent, and Ford's by 3.03 percent. Significant losses were also recorded by auto parts manufacturers - Aptiv lost 7.61 percent, and Cummins 2.71 percent.
Cryptocurrencies are also affected by market uncertainty. Bitcoin fell below the psychological threshold of $100,000, losing 1.61 percent and reaching $96,109.
European Stock Markets in Red
The German economy is also reacting to President Donald Trump's decisions to impose tariffs on products from Canada, Mexico, and China. Concerns are raised by the U.S. president's suggested possibility of extending tariffs to goods from the European Union. The most affected were shares of European car manufacturers and industrial companies.
Volkswagen recorded a 5.54-percent drop, one of the steepest declines in the DAX index. Concerns over the introduction of tariffs on cars exported to the U.S. also affected other automakers - Mercedes-Benz shares lost 3.85 percent, and BMW fell by 3.36 percent. Among industrial companies, Siemens recorded the largest losses, with its shares falling by 3 percent.
Significant declines were also noted on the Paris stock exchange. Stellantis recorded a 5.97-percent drop, which was the largest single-day decline among companies listed in the CAC 40 index. Luxury goods manufacturers also felt the uncertainty - shares of Kering lost 4.04 percent. Significant losses were also noted for industrial companies, like Saint Gobain with a 3.71 percent drop, and Legrand, whose shares fell by 3.4 percent. Steel producer ArcelorMittal ended the session with a 3.23 percent drop.
The introduction of new U.S. tariffs on goods from Mexico and Canada includes 25-percent fees on imported cars and car parts, with imports from Mexico valued at about $150 billion annually. Additionally, tariffs also covered alcohol, including tequila, with imports to the U.S. reaching $5 billion. New tariffs also apply to products from China, which are subjected to an additional 10-percent fee. The value of imported electronics from China exceeds $130 billion, and tariffs also cover toys and sports equipment.
