US markets close lower after early slump amid concerns over Trump’s Tariffs
The US stock markets ended the day lower after an early morning decline, as President Donald Trump agreed to delay the implementation of trade tariffs on Mexico.
Following an initial slump, Trump announced a postponement of the planned 25 per cent tax on Mexican imports after Mexico’s President, Claudia Sheinbaum, pledged to deploy additional troops to the country’s northern border. The imposition of tariffs on imports from Canada, Mexico, and China had already sent shockwaves through global financial markets.
The Dow Jones Industrial Average fell by over 122 points, while the NASDAQ dropped approximately 235 points. Meanwhile, the S&P 500 declined by 0.76 per cent, mirroring losses across Asian and European markets.
Market fears over Tariffs’ economic impact
The US stock market had been on course for a more substantial decline as investors grappled with concerns over the potential impact of Trump’s tariffs on American businesses. There are widespread fears that these tariffs will lead to higher prices for groceries, electronics, and household essentials. Trump himself acknowledged that Americans might experience “some pain” as a result of the tariffs.
The tariffs were initially set to take effect on Tuesday after Trump signed a trio of executive orders authorising their implementation. The move has heightened tensions with key trade partners, prompting concerns over retaliatory measures.
Tensions escalate with canada and mexico
Trump stated that he was scheduled to speak with Canadian Prime Minister Justin Trudeau later on Monday, after Canada announced its intention to impose 25 per cent tariffs on $106.5 billion worth of US goods.
“Canada doesn’t even allow US banks to open or conduct business there. What’s that all about?” Trump posted on Truth Social shortly before US markets opened.
He also framed the tariffs as part of a broader strategy to combat drug trafficking, writing, “Many such things, but it’s also a DRUG WAR, and hundreds of thousands of people have died in the US from drugs pouring through the borders of Mexico and Canada. Just spoke to Justin Trudeau. Will be speaking to him again at 3:00 PM.”
Inflation and federal reserve concerns
While inflation in the US has generally been on a downward trajectory since its peak three summers ago, analysts warn that persistent inflationary pressures could prevent the Federal Reserve from further cutting interest rates. The central bank began easing rates in September to bolster the US economy, but the uncertainty surrounding trade policies could complicate its future decisions.
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Trump has defended the tariffs as a means to curb drug trafficking and illegal immigration from Canada and Mexico. In addition to the 25 per cent tariffs imposed on these nations, Chinese imports will also be subject to a new 10 per cent levy, with Trump suggesting that further countries may be added to the list in the near future.
Over the weekend, both Mexico and Canada announced retaliatory tariffs on US goods, further escalating trade tensions.
Global Markets React
The uncertainty surrounding Trump’s trade policies has rippled through global markets, with European and Asian indices posting losses in response to the US market downturn. Investors remain on edge as they assess the potential long-term impact of these protectionist measures on global trade and economic stability.
