Dow falls by almost 700 points after Trump’s tariffs threaten a dangerous trade war
By: Lucy Bayly and John Towfighi (CNN)
By now we should all be able to recite the litany of woe. Tariffs are a tax on consumers. Tariffs will raise prices on everything. Tariffs will cause a recession. Tariffs make us poorer, weaker, and gives us bad breath.
So, what's the response?
China and Canada immediately retaliate against Trump’s tariffs. Mexico is next
By Elisabeth Buchwald , (CNN)
That's right, the answer to Trump's tariffs is tariffs. China, Canada, and Mexico are going to tax their consumers and raise the price on everything in response to Trump's tariffs. But these retaliatory tariffs are intended to change trade policy to benefit China, Canada, and Mexico.
Yes, indeed, Donald Trump has violated the conventions of civilized international behavior because he wants to change the trade policies of China, Canada, and Mexico to benefit the United States. Apparently the United States is not allowed to reap the same sorts of benefits from trade enjoyed by China, Canada, and Mexico.
According to CNN (the news source for both reports) the 'good' tariffs are fighting the 'bad' tariffs. The 'bad' tariffs are going to punish American consumers and the 'good' tariffs are going to punish American workers. As long as the United States doesn't benefit, no sacrifice is too large.
Jeff Bezos wants to extend his gratitude to all the free trade warriors fighting on his behalf.
S E E D E D C O N T E N T
New York (CNN) — US stocks whipsawed Tuesday after President Donald Trump made good on his threat to levy tariffs on Canada and Mexico, paving the way for a global trade war as leaders of both trading partners threatened retaliation.
The hefty tariffs imposed by the Trump administration could contribute to a crash in the global economy, similar to the Great Depression of the 1930s, said Andrew Wilson, deputy secretary-general of the International Chamber of Commerce, according to the Wall Street Journal.
“Our deep concern is that this could be the start of a downward spiral that puts us in 1930s trade-war territory,” Wilson said.
After dropping by around 800 points in the morning, the Dow recouped its losses before plunging at the end of trading to close lower by around 670 points, or 1.55%, at 42,521. The broader S&P 500 fell 1.22% and the Nasdaq Composite fell 0.35%, paring some of its losses after dipping into correction territory earlier.
“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,’” said Steve Sosnick, chief strategist at Interactive Brokers.
The VIX, Wall Street’s fear gauge, surged to its highest level this year as volatility gripped markets.
The S&P 500 erased its gains since Trump’s reelection in November. The benchmark index on Tuesday plummeted below its 125-day moving average, signaling investors are skittish, according to CNN’s Fear and Greed Index.
There was a broad selloff in markets across the globe Tuesday in response to Trump’s decision to go forward with tariffs: In Europe, the STOXX Europe 600 index fell 2.14% and Germany’s DAX index tumbled 3.54%. In Asia, Japan’s Nikkei 225 index fell 1.2% and Hong Kong’s benchmark Hang Seng index slid 0.28%.
“The market finally took the Trump administration at its word, and the realization that the tariff talk wasn’t just a negotiating tactic is starting to sink in,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, in a note Tuesday.
Meanwhile, the US dollar slid to its lowest level since December, as investors reckoned with short-term uncertainty and the potential for a slowdown in the US economy. Mexico’s peso fell slightly against the dollar. The Canadian dollar gained slightly.
The changes in the peso and Canadian dollar were relatively modest considering the scope of the tariffs, signaling traders might still be hopeful the tariffs won’t remain in place for long, said Lee Hardman, a senior currency analyst at MUFG, in a note Tuesday.
Futures on gold rose, signaling more uncertainty about geopolitical stability.
Trading partners announce tit-for-tat tariffs
The 25% tariff on goods imported from the US’s closest trading partners comes after Trump also imposed an additional 10% tariff on Chinese goods, raising that country’s rate to 20%.
The broad-based levies are intended to stem the flow of fentanyl into the United States, the Trump administration said.
But the impact of tariffs on everyday goods for Americans could stall the economic engine that drives US growth. Inflation-weary consumers are already starting to rein in their spending as uncertainty ripples through households. Layoffs are rising, consumer confidence has plunged, and inflation is still above the Federal Reserve’s target of 2%.
China immediately struck back Tuesday, announcing tariffs on chicken, pork, beef and some agricultural imports from the US, according to a statement from the State Council Tariff Commission.
Canadian Prime Minister Justin Trudeau warned Tuesday in a press conference that Canada “will not back down from a fight.” He said he would implement a 25% tariff on C$30 billion ($20.7 billion) of US goods immediately, followed by an additional C$125 billion ($86.2 billion) in 21 days’ time.
“This is a very dumb thing to do,” he said, in remarks he said were directed at Trump. “There is absolutely no justification or need whatsoever for these tariffs today.”
Mexico’s President Claudia Sheinbaum said Tuesday she would announce retaliatory tariffs on US imports on Sunday, noting at a news conference in Mexico City: “The unilateral decision made by the United States affects national and foreign companies operating in our country, as well as our people.”
While Trump has long signaled his intent to impose stringent levies on America’s trading partners, many investors believed the threat of tariffs was a negotiation strategy. But as the deadline neared, fear rose that Trump’s actions would spark a trade war.
That triggered a massive selloff on Wall Street on Monday: The Dow ended the day down by 650 points, the S&P had its worst day since December and the Nasdaq Composite flirted with correction territory.
“While Tuesday’s tariffs are a go, it remains very unclear on just how long these tariffs will remain,” wrote Clark Geranen, chief market strategist at CalBay Investments, in a note Tuesday. “We tend to believe these are more of a negotiation tactic and not the start of a long and drawn out reciprocal trade war. Still, in these situations, investors sell first and ask questions later, as seen during Monday’s selloff.”
George Smith, portfolio strategist for LPL Financial, said in an email that as troubling as a large one-day decline in the S&P 500 can be, it’s important to put it in context. US stocks also closed at record highs just last week.
“While every situation is different, historically, buying the dip after such single day declines has been a successful strategy on average,” Smith said.
Trump is scheduled later Tuesday to deliver to Congress the first address of his second term. The theme of that speech, “Renewal of the American Dream,” comes as the stock market has now erased all gains since he became president and the Federal Reserve Bank of Atlanta’s real-time GDP forecast projects the economy could contract by 2.8%.
“Extreme fear” was the sentiment driving markets on Tuesday for the sixth day in a row, according to CNN’s Fear and Greed Index.
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So, now we have 'bad' tariffs imposed by Trump. We have 'good' tariffs imposed because of Trump. And the price of cabbage in Kiev hasn't changed at all.
Do you think it is beneficial to the USA for Trump to impose these tariffs? If so, what is the benefit and when will we see it? And, do you recognize any drawbacks?
Well, of course, the tariffs could be beneficial. (Note: could) But to be beneficial there does need to be both a trade policy and industrial policy. So, the whole package would involve tariffs, taxes, trade agreements, and a lot of what Newt Gingrich would call welfare for business. We'll probably need reforms on finance and the banking system, too.
The drawbacks? The billionaires that Clinton favored could undermine the effort and profit from shorting the United States. Everyone whining about a falling stock market ain't trying to protect the little guys in our economy. And the sudden interest in the plight of consumers is gross theatrics after Biden's inflation cut the buying power of the dollar by 20 pct.
The tariffs are only a part of what is needed. The United States cannot continue to lead the free world by becoming dependent upon those who work against the interests of the United States. Free trade has failed. Time to acknowledge that fact and move on.
25% across the board tariffs are beneficial in what way? Be specific. What specific benefit does a 25% across the board tariff bring to the equation (even if other factors are involved)?
Yes, actually list them instead of going off on a tangent about Soros shorting the US.
Okay, there is no point discussing this with you.
(Biden really did invest taxpayer money into auto manufacturers producing EVs. That taxpayer money wasn't used to create suppliers in Canada and Mexico.)
Canadian electricity generators didn't contribute anything, why should they benefit?
Who was supposed to get the economic benefit from Biden's Inflation Reduction Act? China hasn't provided jobs for coal miners thrown out of work. Canada isn't maintaining the transmission lines in the United States. Mexico hasn't constructed any infrastructure to carry their trucks anywhere in the United States.
Amazon and Walmart are not passing along all the savings they get from exploiting slave labor in foreign countries. These middlemen operations only undercut prices enough to destroy the profitability of domestic manufacturing. They're reaping all the benefits from free trade at the expense of American labor and American consumers.
Where has free trade delivered the American prosperity that was promised? Be specific instead of fuzzy.
A 25% across the board tariff did not bring any of these events.
That is not a drawback of tariffs.
As I noted there is no point discussing this with you. Especially if you are going to try to pass off bullshit.
Some are citing the threat of tariffs as motivation.
Still too complicated? How's this, unproductive middlemen will exploit tariffs for profiteering.
One can cite anything. That does not make it true.
Kinda makes it difficult to organize protests, doesn't it?
Democrats on even days: Tariffs are a tax on consumers.
Democrats on odd days: Biden never raised taxes on the working class.
If MAGA hated inflation under Biden are MAGA gonna embrace it now? I ask because, Trump's tariffs will bake inflation into our economy...
So Yellin and Biden lied when they claimed tariffs weren't inflationary?
last i knew, inflation was already baked in and factored into the economy, at about a 3% +/-rate annually.
you might be thinking hyper inflation though
Regardless of party, that is a fact. Tariffs are equivalent to a consumption tax on the specific items under the tariff. An across-the-board tariff is equivalent to a conventional consumption tax.