Trade War Concerns May Spark Early Sell-Off On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Monday, with stocks likely to see continued weakness following the downturn seen over the course of the previous session.

Concerns about a global trade war are likely to weigh on Wall Street after President Donald Trump officially imposed a 25 percent tariff on imports from Canada and Mexico and a 10 percent tariff on imports from China.

A statement from the White House said Trump is taking “bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.”

Trump also threatened possible tariffs against the United Kingdom and the European Union, marking a significant escalation.

Canada and Mexico ordered retaliatory tariffs on American goods, while China vowed countermeasures. The EU also warned of firm retaliation if targeted.

Investors fear that a trade war could hit the earnings of major companies and dent global growth. The tariffs could also lead to renewed inflation fears, leading the Federal Reserve to keep interest rates on hold for longer.

After showing a strong move to the upside early in the session, stocks came under pressure over the course of the trading day on Friday. The major averages pulled back well off their early highs and into negative territory.

The major averages finished the day just off their lows of the session. The Dow slid 337.47 points or 0.8 percent to 44,544.66, the S&P 500 fell 30.64 points or 0.5 percent to 6,040.53 and the Nasdaq dipped 54.31 points or 0.3 percent to 19,627.44.

For the week, the Dow rose by 0.3 percent, but the S&P 500 slumped by 1.0 percent and the Nasdaq tumbled by 1.6 percent.

Stocks showed a notable move to the downside in afternoon trading after White House press secretary Karoline Leavitt confirmed President Donald Trump’s threatened tariffs would be levied against major U.S. trading partners beginning Saturday.

Leavitt said the Trump administration would be implementing 25 percent tariffs on Mexico and Canada as well as a 10 percent tariff on China.

The White House press secretary said the tariffs were being imposed in response to the illegal fentanyl the countries have “sourced and allowed to distribute into our country, which has killed tens of millions of Americans.”

The news the tariffs will be implemented led to concerns about higher inflation keeping the Federal Reserve on hold for longer.

Earlier in the day, stocks benefited from a positive reaction to earnings news from Apple (AAPL), which reported fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Apple pulled back well off their best levels as the day progressed, however, with the tech giant falling by 0.7 percent after surging by as much as 4.0 percent.

Buying interest was also generated in reaction to a closely watched Commerce Department report showing consumer prices in the U.S. increased in line with economist estimates in the month of December.

Meanwhile, a slump by shares of Chevron (CVX) weighed on the Dow, with the energy giant plunging by 4.6 percent after reporting weaker than expected fourth quarter earnings.

Oil stocks moved sharply lower over the course of the session, dragging the NYSE Arca Oil Index down by 2.9 percent. The plunge by Chevron weighed on the sector along with a decrease by the price of crude oil.

An increase by treasury yields also weighed on housing stocks, as reflected by the 2.6 percent slump by the Philadelphia Housing Sector Index.

Natural gas, steel and transportation stocks also saw considerable weakness, while significant strength remained visible among networking stocks.

Commodity, Currency Markets

Crude oil futures are jumping $1.47 to $74 a barrel after slipping $0.20 to $72.53 a barrel last Friday. Meanwhile, after falling $10.20 to $2,835 an ounce in the previous session, gold futures are climbing $16.70 to $2,851.70 an ounce.

On the currency front, the U.S. dollar is trading at 154.74 yen versus the 155.19 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0266 compared to last Friday’s $1.0362.

Asia

Asian stocks slumped on Monday as U.S. President Donald Trump followed through on his threats to impose tariffs on Canada, Mexico and China and also threatened possible tariffs against the United Kingdom and the European Union, marking a significant trade escalation.

Canada and Mexico ordered retaliatory tariffs on American goods, while China vowed countermeasures. The EU also warned of firm retaliation if targeted. Investors fear that a trade war could hit the earnings of major companies and dent global growth.

The U.S. dollar rallied on risk-off sentiment, denting demand for bullion. Oil prices jumped, with WTI crude futures rising more than 2 percent on supply disruption fears.

Markets in mainland China remained closed for the Lunar New Year holiday. Hong Kong’s Hang Seng Index finished marginally lower at 20,217.26, ending off the day’s lows as weak Chinese manufacturing data underlined the need for more government support measures to support the economy.

A private gauge of China’s manufacturing activity expanded at a slower pace in January, while the official index tumbled into contraction to hit a five-month low, partly due to the approach of the public holidays.

Japanese markets slumped on concerns over the escalation of Trump’s tariff measures. The Nikkei 225 Index dove 2.7 percent to 38,520.09, while the broader Topix Index settled 2.5 percent lower at 2,720.39. Automakers led losses, with Toyota Motor, Honda and Nissan plummeting 5-7 percent.

Seoul stocks lost ground as the won weakened to a three-week low on U.S. tariff concerns. The Kospi plunged 2.5 percent to 2,453.95. Market heavyweight Samsung Electronics dropped 2.7 percent and its chipmaking rival SK Hynix gave up 4.2 percent.

LG Electronics, which has a production base in Mexico, plummeted 7.1 percent. Steelmaker POSCO Holdings fell 4.6 percent after reporting weakened earnings.

Australian markets declined on fears of a global trade war. The benchmark S&P/ASX 200 Index closed 1.8 percent lower at 8,379.40, marking its steepest one-day drop since September 4. The broader All Ordinaries Index fell 1.8 percent to 8,628.40, with banks and mining stocks pacing the declines.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended down 1.4 percent at 12,810.32.

Europe

European stocks have moved sharply lower on Monday after U.S. President Donald Trump imposed tariffs on Canada, Mexico and China and promised to make similar moves against the European Union.

Investors worry that a potential trade war could weigh on global economic growth and hit the earnings of major companies.

While the German DAX Index is down by 1.6 percent, the French CAC 40 Index is down by 1.4 percent and the U.K.’s FTSE 100 Index is down by 1.3 percent.

Tariff worries and signs of intense Chinese competition weighed on automakers, with BMW, Mercedes Benz, Volkswagen and Stellantis plummeting 4-6 percent.

Technology stocks also suffered broad-based losses, with Infineon Technologies tumbling 3.2 percent and ASML Holding falling 2.5 percent.

Julius Baer plunged more than 10 percent as the Swiss bank announced plans to cut its workforce by about 5 percent as part of savings measures under new chief executive Stefan Bollinger.

Sandoz slumped 4.6 percent. The generic pharmaceutical company has appointed Peter Stenico as the new President Region International and member of the Sandoz Executive Committee.

U.S. Economic News

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of January at 10 am ET.

The ISM’s manufacturing PMI is expected to inch up to 49.8 in January from 49.3 in December, but a reading below 50 would still indicate contraction.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of December. Construction spending is expected to rise by 0.2 percent in December after coming in unchanged in November.

Atlanta Federal Reserve President Raphael Bostic is scheduled to speak on the economic outlook in a moderated conversation hosted by the Rotary Club of Atlanta at 12:30 pm ET.

At 6:30 pm ET, St. Louis Federal Reserve President Alberto Musalem is due to deliver welcome remarks before the 2025 Homer Jones Memorial Lecture.