On Saturday, President Trump issued tariffs against three of America’s largest trading partners. Global markets were sent into chaos as investors positioned themselves for an impending trade war.
The tariffs were originally supposed to go into effect at midnight. However, the White House announced Monday that it had reached an agreement with Mexico in order to postpone the fees by a month. Trump said that he had spoken to Justin Trudeau, the Canadian Prime Minister. He will speak with him again at 3pm ET.
Volatility is the name of the game today — and probably will be all week — as traders struggle to keep up with every new headline.
The following are highlights from the market since Saturday.
- Over the weekend, it was predictable that stock futures plummeted. The S&P 500 and Nasdaq Composite slid sharply at the open Monday, but both indexes pared some losses after news broke that the 25% tariff on Mexico will be delayed.
- Bitcoin hit a low for the 30-day period of under $93,000 in late Sunday, but rebounded. As of 2 pm ET, Bitcoin was worth around $100,000.
- Mexican pesos gained up to 1% on Monday. They erased their losses from Friday. Canadian dollars also rose against the US Dollar this morning. However, they were not yet back at their pre-weekend level.
At least as of the time this article was written, Trump had reached a deal to defer the tariffs by a month with Mexico, but the levies against Canada and China were still scheduled to start on Tuesday.
In theory, the tariffs shouldn’t be surprising. Trump promised during his election campaign that he’d hit Mexico and Canada 25% with tariffs, and China 10%.
Tariffs disappeared from his first-day action frenzy. There were also reports that the team was going to take a more gradual approach, like they had in 2018. I’ll admit it, but I definitely was. “gradual” Camp myself.
The market is booming “completely under-pricing the risks,” Jim Reid, an analyst at Deutsche Bank, wrote today in a letter. “severe shock” We are currently experiencing.
The markets, up until this point, seemed to view tariffs more as a strategy for negotiation than an actual reality. It is possible to reach a deal in Canada, but “there is still asymmetry to the downside in case of disappointment on the progress of these talks,” Aurelie barthere, Nansen’s principal research analyst, stated.
Today, ISM released its latest manufacturing index, which shows growth for the month of December, marking the first expansion in two years. It could be argued that pre-emptive stockpiling was the cause of this growth, rather than a general expansion. However, only time will tell.
According to the Institute of Supply Management (ISM), which conducted this survey, Trump’s new tariffs are a danger to the manufacturing industry.
“I don’t think tariffs are going to help us,” Timothy Fiore is the Chair of the Survey. “This is not a good thing for business.”
Fiore noted that it is yet to be determined when tariffs will be introduced (since he expressed skepticism even before Mexico’s deal was announced) and the exact date.
General fears are that raw material prices will increase, and exports may also be subject to higher tariffs as a result of retaliation.
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