The World/Financial Markets React to Trump Tariffs
Financial markets sell off on tariff fears … Mexico blinks first … the list of assets that have hit all-time highs recently … which of those gains are illusory
Just minutes into trading Monday morning, all three major stock indexes were deep in the red as the world reacted to President Trump’s tariffs that go into effect tomorrow morning.
The new levies included 25% tariff on imports from Canada and Mexico, with a lower 10% charge on Canadian oil, natural gas, electricity and other energy products. Chinese products also face a 10% tariff.
Stocks were selling off for three primary reasons…
First – uncertainty. Wall Street hates not knowing what’s on the way. The duration, scope, and global reaction to these tariffs are a big unknown.
Second – fears of reduced earnings. Tariffs increase the risk of kneecapping corporate bottom lines as sticker-shock causes price-conscious consumers to fold up their wallets. Today’s stock valuations require strong earnings growth. Without them, prices will appear far too overextended.
Third – inflation. The consumers that do buy at elevated prices are fueling an inflationary cycle, potentially triggering even higher prices to come.
By mid-morning, it appeared the day’s losses would snowball into something rather nasty.
But then, one concession…
Around 10:30 AM Eastern, news broke that Mexican President Claudia Sheinbaum has ordered a troop deployment to the U.S./Mexico border. In response, U.S. tariffs on Mexican goods are now paused for one month.
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