Trade War Concerns Likely To Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to see further downside after coming under pressure over the course of the previous session.

Concerns about a global trade war are likely to weigh on Wall Street after President Donald Trump’s tariffs on imports from Canada, Mexico and China took effect.

The White House said Trump is proceeding with implementing previously paused 25 percent tariffs on Canada and Mexico to combat the extraordinary threat to U.S. national security posed by unchecked drug trafficking.

Trump also increased the tariff on Chinese imports to 20 percent from 10 percent, claiming the country has not taken adequate steps to alleviate the illicit drug crisis.

Canada responded by announcing 25 percent retaliatory tariffs on $107 billion worth of U.S. imports, while Mexican President Claudia Sheinbaum said her government has made “contingency plans” to respond to the new tariffs.

China also said it would impose additional tariffs of 10-15 percent on several agricultural goods, including soybeans, corn, dairy and beef.

“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power,” said Russ Mould, investment director at AJ Bell.

“Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war,” he added. “Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.”

After showing a lack of direction early in the session, stocks moved sharply lower over the course of the trading day on Monday. The major averages all showed significant moves to the downside, with the tech-heavy Nasdaq plunging to a four-month closing low.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Nasdaq dove 497.09 points or 2.6 percent to 18,350.19, the S&P 500 tumbled 104.78 points or 1.8 percent to 5,849.72 and the Dow slumped 649.67 points or 1.5 percent to 43,191.24.

The substantial weakness that emerged on Wall Street came amid concerns about the economic impact of President Donald Trump’s proposed tariffs.

During an appearance on Fox News over the weekend, Commerce Secretary Howard Lutnick described the proposed 25 percent tariffs on imports from Mexico and Canada as “fluid” but said the additional 10 percent tariff on imports from China is “set.”

Trump later clarified that the 25 percent tariffs on imports from Mexico and Canada will take effect on Tuesday and reciprocal tariffs on other U.S. trade partners will be imposed on April 2nd.

On the U.S. economic front, the Institute for Supply Management released a report showing its reading on U.S. manufacturing activity edged slightly lower in February but still indicated growth in the sector for the second straight month.

The ISM said its manufacturing PMI slipped to 50.3 in February after rising to 50.9 in January, although a reading above 50 still indicates growth. Economists had expected the index to dip to 50.5.

The report also said the prices index surged to 62.4 in February from 54.9 in January, reflecting the largest month-over-month increase since January 2024.

“Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery stoppages and manufacturing inventory impacts,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “Although tariffs do not go into force until mid-March, spot commodity prices have already risen about 20 percent.”

A separate report released by the Commerce Department showed construction spending in the U.S. unexpectedly edged modestly lower in the month of January.

Computer hardware stocks extended the sharp pullback seen over the past couple weeks, dragging the NYSE Arca Computer Hardware Index down by 4.2 percent to its lowest closing level in a month.

A steep drop by the crude oil also weighed on oil producer stocks, as reflected by the 4.1 percent nosedive by the NYSE Arca Oil Index. The index ended the session at a two-month closing low.

Semiconductor stocks also moved sharply lower over the course of the session, resulting in a 4.0 percent slump by the Philadelphia Semiconductor Index.

Networking, airline and retail stocks also saw considerable weakness on the day, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.84 to $67.53 a barrel after tumbling $1.39 to $68.37 a barrel on Monday. Meanwhile, after surging $52.60 to $2,901.10 an ounce in the previous session, gold futures are jumping $32.60 to $2,933.70 an ounce.

On the currency front, the U.S. dollar is trading at 148.43 yen compared to the 149.50 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0536 compared to yesterday’s $1.0487.

Asia

Asian stocks ended mostly lower on Tuesday as fresh U.S. tariffs came into effect. While Canada vowed retaliatory 25 percent tariffs on C$155 billion ($107 billion) of U.S. goods, China said it would impose additional tariffs of 10-15 percent on several agricultural goods, including soybeans, corn, dairy and beef.

The dollar index weakened, helping bullion recoup some recent losses. Oil extended steep losses from the previous session following reports that OPEC+ will proceed with a planned output increase in April.

China’s Shanghai Composite Index ended up 0.2 percent at 3,324.21, reversing an early slide amid expectations that policymakers will announce a huge stimulus package at a key parliamentary meeting on Wednesday.

Hong Kong’s Hang Seng Index slipped 0.3 percent to 22,941.77, heading into the National People’s Congress (NPC) meeting.

The Japanese yen and China’s yuan both inched higher after U.S. President Donald Trump said the countries cannot keep reducing the value of their currencies.

Japanese markets fell sharply as Trump reaffirmed plans to raise tariffs on Chinese, Mexican and Canadian imports, and data showed the unemployment rate in the country edged up to 2.5 percent in January from 2.4 percent in December.

The Nikkei 225 Index tumbled 1.2 percent to 37.331.18, while the broader Topix Index closed down 0.7 percent at 2,710.18.

Automakers led losses, with Toyota Motor, Honda and Nissan falling between 1.5 percent and 2.4 percent.

Seoul stocks edged down slightly, with the Kospi closing 0.2 percent lower at 2,528.92, extending losses for a third straight session and hitting a three-week low. LG Energy Solution, which has operations in Canada and China, plummeted 5.7 percent.

Nexteel soared over 26 percent and Husteel jumped 14.4 percent after South Korea reportedly expressed interest in a gas pipeline project in Alaska.

Australian shares fell on risk-off sentiment amid tariff uncertainties and ahead of retail sales data for January and the minutes of the RBA’s February meeting minutes, both due later in the day.

The benchmark S&P/ASX 200 Index dropped 0.6 percent to 8,198.10, with banks, mining and energy stocks leading losses. The broader All Ordinaries Index settled 0.7 percent lower at 8,420.90.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index slid 0.6 percent to 12,469.71 on lingering worries about U.S. tariff measures.

Europe

European stocks have declined on Tuesday after reaching record highs in the previous session, led by defense-related stocks.

Trade tensions weighed on markets after U.S. President Donald Trump’s long-threatened tariffs against Canada, Mexico and China went into effect today.

Canada announced 25 percent tariffs on $107 billion worth of U.S. goods, with $20.7 billion in immediate effect. Mexican President Claudia Sheinbaum said her country is preparing countermeasures.

China has announced 15 percent tariffs on U.S. chicken, wheat, corn and cotton, plus 10 percent tariffs on soybeans, pork, beef and dairy beginning March 10.

The German DAX Index is down by 2.7 percent, the French CAC 40 Index is down by 1.8 percent and the U.K.’s FTSE 100 Index is down by 0.7 percent.

Automakers led losses, with Volkswagen, Renault, BMW and Stellantis posting notable losses. Oil & gas giants BP Plc and Shell have also slumped, tracking the downward trend in crude oil prices.

Ashtead Group shares have also tumbled. The British equipment rental firm missed third-quarter pre-tax profit and revenue expectations but maintained its full-year outlook.

Germany’s Continental AG has also plummeted after saying it expects limited improvement to profitability this year.

Low-cost carrier Wizz Air Holdings has also moved sharply lower after unveiling passenger tariff figures for January.

On the other hand, defense and technology group Thales has soared in Paris after reporting robust 2024 earnings.

Bilfinger, an industrial services provider, has also rallied after raising its dividend and confirming its mid-term view.

Fresnillo, a precious metals mining company, has also jumped after announcing a solid financial performance for the full year ended December 31, 2024.

U.S. Economic News

New York Federal Reserve President John Williams is scheduled to participate in a moderated discussion at a Bloomberg Invest event organized by Bloomberg LP at 2:20 pm ET.