U.S. Stocks May See Further Downside Amid Trade War Concerns

After coming under pressure over the course of the previous session, stocks are likely to see further downside in early trading on Tuesday. The major index futures are currently pointing to a lower open for the markets, with the S&P 500 futures down by 0.8 percent.

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 plummeted 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 dove 649.67 points or 1.5 percent to 43,191.24.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index slumped 1.2 percent, while Hong Kong’s Hang Seng Index fell by 0.3 percent.

The major European markets have also shown significant moves to the downside. While 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.

In commodities trading, 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.