Markets flip positive as Trump tariffs take effect

Dow settled down 670 with selling into the close which pared a midday rebound, decliners over advancers 5-2 & NAZ gave back 65.  The MLP index continued weak, down 5+ to the 317s, & the REIT index was off 5 to the 416s.  Junk bond funds slid lower & Treasuries were sold in the PM, taking yields higher.  Oil rebounded & finished steady at 68 & gold rose 22 to 2923 (more on both below).

Dow Jones Industrials

Pres Donald Trump is pushing back against Canadian Prime Minister Justin Trudeau, calling his tariffs "very dumb," saying that "when he puts a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!"  Trump made remarks were after Trudeau slammed the Trump administration's new 25% tariffs.  Trudeau previously announced 25% retaliatory tariffs on American goods in response to Trump's tariffs that went into effect today on Canadian imports.  "So today the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same time, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense," Trudeau said.  "Canadians are reasonable, and we are polite, but we will not back down from a fight, not when our country and the well-being of everyone in it is at stake," he continued.  "I want to speak directly to one specific American. Donald, in the over eight years you and I have worked together, we've done big things," Trudeau added.  "And now we should be working together to ensure even greater prosperity for North Americans in a very uncertain and challenging world. Now, it's not in my habit to agree with the Wall Street Journal. But Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do. We – two friends fighting – is exactly what our opponents around the world want to see."  Trump signed an exec order authorizing an additional 25% tariff on imports from Canada & Mexico, & an additional 10% tariff on Chinese imports.  Energy imported from Canada, including oil, natural gas & electricity, would be taxed at an additional 10%.  The retaliatory tariffs Canada is imposing on $155B of US goods went into effect today.  Canada will start with tariffs on $30B worth of American goods, followed by tariffs on $125B of American products in 21 days.

Trump responds to Trudeau's rebuke of hard-hitting tariffs officially going into effect

A US economy praised for its surprising resilience to a pandemic, high inflation & rapid interest rate hikes faces a new challenge from Pres Trump's self-declared trade war, seen by economists as a recipe for fewer jobs, slower growth & higher prices.  The fallout, assuming Trump does not backtrack in the face of falling stock markets & cracks to consumer & business sentiment, is expected to be broad, deep & time-consuming as the world's largest economy adjusts to the overnight shock of a 25% tariff on most goods coming from Mexico & Canada, both close trading partners & geographic neighbors, & an additional 10% duty on imports from China.  Canada & China have announced retaliatory tariffs on US imports, while Mexico is expected to do so this coming weekend.  A price shock on its face, the tariffs could also begin to kill demand, said Diane Swonk, chief economist at KPMG, particularly if consumers retreat & firms facing heightened uncertainty curb investment and hiring.  The move also risks unintended consequences - if, for example, banks tighten credit on small businesses instead of extending suddenly expensive customs bonds.  A recession by the start of next year is not out of the question, Swonk said, with some analysts expecting a downturn could sweep the continent given the dependence of Canada & Mexico on exports to the US market.  Retaliation could further deepen the impact.  "We've got now multiple trade wars on multiple fronts," Swonk said.  Her analysis shows the effective tariff rate spread across roughly $3T in US imports might rocket to 16% by early 2026 from a current baseline of about 3% if Trump follows thru on all his threats.  "That would be the highest rate since 1936," during the Great Depression, and "gets you flirting with stagflation" - the toxic mix of weak growth, high joblessness & persistent inflation that epitomized the 1970s.  While the US economy is ordered differently now than in the 1930s or 1970s, the sweep of Trump's actions & the uncertainty about what comes next still unnerved markets that had hoped he was only bluffing about tariffs to gain leverage in negotiations with trading partners.

Storm clouds gather over US economy as Trump kicks off trade war

Federal Reserve Bank of New York Pres John Williams said that Trump administration tariffs will have some impact on driving up price pressures but there is still a lot of uncertainty how this will all play out.  “I do factor in some effects” from tariffs on inflation that will play out over the year, Williams said at an event in New York.  He views monetary policy as being in a “good place” & “I don’t see any need to change it” right now.

Fed's Williams: Tariffs may push up inflation, rate policy in good place

Gold prices rose, driven by a weaker $ heightened safe-haven demand amid escalating trade conflicts following Pres Trump's imposition of new tariffs.  Spot gold was up 0.6% at $2911 an ounce.  Bullion has gained nearly 11% so far this year & hit a record high of $2956 on Feb 24.  US gold futures settled 0.7% higher at $2920.  The implementation of tariffs brings a high level of uncertainty to the markets, & safe-haven products like gold continue to do well.  Trump's new 25% tariffs on imports from Mexico & Canada today.  He also doubled duties on Chinese goods to 20%. China hit back immediately with additional 10%-15% tariffs on certain US imports from Mar 10 & a series of new export restrictions for designated US entities.  Canada retaliated with 25% tariffs on $30B worth of US imports with immediate effect today.  The US dollar index fell 0.6%, hitting its lowest level since Dec & making $-priced gold less expensive for buyers holding other currencies.

Gold rises on weaker dollar, trade war fears after Trump tariffs

Oil prices dropped again as traders faced up to a double whammy of new tariffs & plans to boost production in a number of OPEC countries.  Brent crude futures, the intl benchmark, fell 1.3% to $70.68 a barrel, putting them down 3% so far in Mar & West Texas Intermediate futures, the US benchmark, were down 0.9% to $67.74, bringing their loss in Mar to around 3% as well.  Both are more than 5% down in 2025.  Pres Trump confirmed  that 25% tariffs on Canada & Mexico were “all set” to take effect today.  He also signed an order increasing levies on China by another 10%.  Several members of OPEC+ expect to start raising production next month.  In total, 8 countries will begin restoring output, adding about 2.2M barrels a day over 18 months.

Oil Prices Drop Again

US markets eliminated all of their post-election gains as stocks responded to fresh tariffs on Canada, Mexico & China.  Rising fears of a full-on trade war drove yesterday's sell-off after Pres Trump said there was "no room left" for Canada or Mexico to strike a deal to mitigate promised tariffs.  Stocks are retreating as markets assess the likely impact of Trump's broad tariffs on America's top trading partners.  The measures, fresh 25% tariffs on Canada & Mexico, & a doubling in China duties to 20%, were signed into effect today.  Comments by John Williams (above) were refreshing & brought back buyers in the PM.