President Trump imposes tariffs on Canada, Mexico, and China, raising concerns about inflation and disrupted supply chains.
Sectors & Industries
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President Trump has imposed 25% tariffs on imports from Canada and Mexico and 10% tariffs on Chinese goods, citing trade imbalances, failure to stop illegal immigration and concerns that China is fueling the fentanyl epidemic by allowing its raw materials into the U.S. The move threatens to increase prices on essential imports like automobiles, electronics, toys, clothing, seemingly anything plastic, and raw materials, potentially fueling inflation.
Canada and Mexico have vowed retaliatory tariffs, with Prime Minister Trudeau calling for tit-for-tat 25% tariff response. Mexico’s President Sheinbaum warned of economic fallout and signaled a plan to reply with tariffs on U.S. goods. China strongly opposed the tariffs but has yet to outline its countermeasures aside from complaining to the World Trade Organization.
Both Canada and Mexico exports about 80% of their goods to the U.S., making them very vulnerable to U.S. import tariffs. In contrast, the U.S. only imports about 15% of its goods from each country. Although countries can find buyers of their products in other countries, and will likely do so to diversify now, that takes time.
Markets reacted negatively Friday afternoon, with the S&P 500 tumbling amid fears of rising costs and disrupted supply chains. While Trump argues tariffs will generate revenue and pressure trade partners into concessions, critics warn of escalating economic tensions and reduced global stability. President Trump has stated he plans to offset tariffs by lowering corporate and individual tax rates, but both would take an act of Congress.
A broad market selloff ensued last Friday afternoon after Trump announced the tariffs - a tax paid by U.S. businesses - on goods imported by the U.S. from Mexico, Canada, and China. Canada, a major U.S. oil importer, announced a 25% tariff on U.S. oil, liquor, beer, and vehicles, sending oil stocks (CVX), pipeline stocks (ET), natural gas stocks (NOG), fertilizer stocks (MOS), automobile stocks (GM, F), beauty stocks (ELF), beer stocks (CEZ) and shoe makers (CROX, DECK) down significantly Friday.
Fears the tariffs would trigger inflation caused a general risk-off, with crypto selling off and Gold prices rising. Bitcoin dropped over 6% while mortgage rate sensitive homebuilder stocks dropped 2.6 percent.
Over the past week, U.S. indices showed mixed performance. The Dow increased modestly by 0.3% to 44,545, while the S&P 500 fell by 1% to 6,041 and the Nasdaq declined by 1.6% to 19,627. The Russell 2000 also dropped by 1% to 2,285, and market volatility rose significantly, with the CBOE Volatility Index up 10.6% to 16.43.
Within the S&P 500 sectors, Consumer Staples, Financials, Telecom, Healthcare, and Consumer Discretionary experienced gains, with Telecom leading at a 2.7% increase and Consumer Staples close behind at 1.9%. However, other sectors such as Utilities, Industrials, Information Technology, Energy, and Real Estate saw declines, with Information Technology dropping the most at 4.6%, and Energy down by 3.8%. Materials and Real Estate showed more modest declines, at 0.2% and 0.3% respectively.
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