How will Donald Trump’s tariff policy dictate Wall Street and global markets? EXPLAINED | Stock Market News
Trump tariffs impact: Wall Street’s main indexes edged up on Wednesday, after better-than-expected services data allayed worries of a slowdown in the U.S. economy, while investors awaited a potential softer approach from President Donald Trump on trade policy.
The S&P 500 was basically unchanged in morning trading after losing 6% since setting its all-time high last month and returning to where it was before President Donald Trump’s election. The Dow Jones Industrial Average was up 111 points, or 0.3%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.1% lower. The benchmark S&P 500 has fallen over 5.7% from its record high, while the tech-heavy Nasdaq has dropped over 9% from its peak.
Investors have sold riskier equities over the past few weeks on fears that Trump’s trade policies would amplify inflation pressures, slow the economy and eat into corporate profits, at a time when multiple reports have suggested a cooling economy.
Investors are also closely monitoring the latest developments on tariffs. Commerce Secretary Howard Lutnick said in an interview that Trump was considering granting some relief on import of items such as cars and autoparts, that comply with the U.S.-Mexico-Canada free-trade agreement.
The remarks came after Trump escalated a global trade war on Tuesday as he imposed 25% tariffs on top trade partners, Canada and Mexico, citing ineffective border controls. The tariff announcement is expected later in the day.
According to Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, “Uncertainty unleashed by Trump tariffs is reigning supreme now and this is weighing on markets. Consequently trading volumes have dipped sharply. Market drifting down on low volumes doesn’t indicate a sustained downtrend from the current levels. In the ongoing chaotic scenario new news and developments can trigger market moves.”
It would be difficult for the US to get away unscathed from the retaliatory tariffs imposed by China, Canada and Mexico. Inflation in the U.S. will rise and the Fed will sound hawkish. A sharp correction in the US stock market is likely. This will hurt Trump’s popularity and the negative wealth effect of a sharp market correction can aggravate the growth slowdown in the US. Soon the Trump regime will realise this.
“It is better for investors to wait and watch for the events to unfold. Fairly valued growth stocks, particularly those focused on domestic consumption like financials, telecom etc, and exports to non-US markets like segments of autos , can be slowly accumulated for the long-term,” added Dr. V K Vijayakumar.
