Trump’s controversial tariff announcement immediately raised concerns about retaliation from China or other major U. S. trading partners.
The Dow dropped more than 500 points on Thursday after President Trump said his administration will impose tariffs on steel and aluminum imports. The Nasdaq and the S&P 500 declined about 1% apiece.
Trump’s controversial tariff announcement immediately raised concerns about retaliation from China or other major U. S. trading partners.
“This is the first shot across the bow over a trade war,” said Art Hogan, chief market strategist at B. Riley FBR. “And nobody wins a trade war.”
Trump said his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. It was not immediately clear whether Trump would exempt some countries from the tariffs, as his national security advisers have urged him to do to avoid hurting U. S. allies.
Corporate America has warned Trump that tariffs could backfire. Last month, the Business Roundtable warned of the risk of “foreign retaliation” that would “harm the U. S. economy.”
Beyond worries about retaliation, the tariff news drove concerns about rising costs for companies that rely heavily on aluminum and steel, like auto and plane makers. Shares of Boeing, General Motors and Ford fell about 3% apiece.
Concerns about trade come at an already shaky time on Wall Street. The S&P 500 and Dow fell about 4% in February, their worst month in two years. Fears about inflation and soaring bond yields caused a surge in volatility, including two 1,000-point plunges for the Dow.
The market had come back as investors focused on the strong economy and booming corporate profits. But stocks fell sharply again on Tuesday and Wednesday. Turbulence has picked up as well. The VIX volatility index soared 15% on Thursday.
At least two corners of the stock market cheered Trump’s tariff announcement. U. S. Steel and AK Steel soared 8% and 11%, respectively.
Trump’s tariff moves could force investors to confront another trade issue: NAFTA. Trump has repeatedly threatened to tear up this major trade deal with Canada and Mexico. Talks to renegotiate NAFTA, a major piece of the U. S. economy, have so far failed to produce a solution.
“It sets off the protectionist fears that had been lying dormant,” said Hogan.
