New York
CNN
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US stocks experienced a turbulent morning on Tuesday after President Trump moved forward with tariffs on Canada and Mexico. This move has ignited fears of a global trade war, with leaders from these countries responding with threats of their own.
Andrew Wilson, deputy secretary-general of the International Chamber of Commerce, warned that these tariffs might lead to a significant downturn in the global economy, reminiscent of the Great Depression. He expressed his concerns that this could mark the start of a dangerous trend in trade relations.
In the markets, the Dow fell sharply, going down by about 570 points, or 1.32%, at midday. The S&P 500 and Nasdaq also saw declines, reflecting investor anxiety as the VIX, which measures market volatility, hit its highest level for the year.
By this point, the S&P 500 had lost all its gains since Trump’s reelection in November, dropping below its 125-day moving average. This decline indicated that investors were quite nervous, further supported by CNN’s Fear and Greed Index.
The market reaction extended beyond the US. In Europe, stock indexes dropped with the STOXX Europe 600 down 2.14% and Germany’s DAX falling 3.54%. In Asia, Japan’s Nikkei and Hong Kong’s Hang Seng also saw losses.
The US dollar weakened, while other currencies like the Mexican peso and the Canadian dollar were impacted. On the other hand, gold futures rose, reflecting growing uncertainties in the geopolitical landscape.
Trump has imposed a 25% tariff on goods from Canada and Mexico, following a recent increase on Chinese goods. The administration claimed that these tariffs aim to reduce the flow of fentanyl into the US.
However, the potential effects of these tariffs could slow down the US economy, already strained by inflation and rising layoffs. Consumers, worried about prices, are starting to cut back on spending.
Investment strategist Chris Zaccarelli noted that the market has begun to take Trump’s tariff threats seriously, understanding that they are more than just negotiation tactics.
In response, China announced its own tariffs on American imports like chicken and pork. Canadian Prime Minister Justin Trudeau vowed to implement substantial tariffs on US goods, stating that Canada would not back down.
Similarly, Mexico’s President Claudia Sheinbaum plans to retaliate with tariffs on US imports, voicing concerns about the ramifications of Trump’s unilateral actions.
Many investors were taken by surprise, realizing that Trump’s promise of tariffs was becoming reality. A significant selloff occurred when the market opened on Monday, with the Dow dropping 650 points and the S&P 500 seeing its worst day in months.
Analysts like Clark Geranen maintain that it remains uncertain how long these tariffs will last, suggesting they may be part of ongoing negotiations rather than the start of a prolonged trade conflict.
George Smith from LPL Financial pointed out that despite the sharp decline, it can be helpful to look at the bigger picture. Stocks recently reached record highs, and historically, buying after significant drops has been a successful strategy for investors.
Trump is set to address Congress later on Tuesday, discussing “Renewal of the American Dream” amid these market challenges and economic forecasts predicting a potential contraction.
According to CNN’s Fear and Greed Index, a sense of “extreme fear” has influenced market behavior for the past six days, highlighting the anxiety surrounding the current economic climate.
This is an evolving story and will be updated.
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