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Trump, Donald

Trump Administration's Trade War Escalation Leaves U.S. Stock Markets Little Changed

Strategic Insights

— 2 min read

The Trump administration's campaign to win more favorable trade deals by imposing tariffs on goods coming into the United States left the major U.S. stock indexes little changed on Tuesday. The S&P 500 slipped 0.1 percent, the Dow Jones industrial average gave back 0.4 percent, and the Nasdaq composite eked out a gain of less than 0.1 percent. Investment strategists are betting that the U.S. and its trading partners may eventually negotiate deals that will reduce or eliminate the need for punishing tariffs.

Key Takeaways:

  • The Trump administration's imposition of tariffs on goods from Japan, South Korea, and 12 other nations set to go into effect on Aug. 1, has sparked a trade war that heightens the threat of potentially more severe tariffs.
  • The tariffs on pharmaceutical drugs at a "very, very high rate, like 200 percent" and a 50 percent tariff on copper imports, as announced by President Trump, will likely have a significant impact on global trade.
  • The market is betting on eventual negotiations between the U.S. and its trading partners to reduce or eliminate tariffs, but the uncertainty surrounding the trade war is causing a pulls-back in some sectors.
  • The stock market's reaction to the trade war is a sign of market volatility and uncertainty, with some stocks, like Intel and Exxon Mobil, rising while others, like JPMorgan and Bank of America, falling.
  • The prolonged trade war has the potential to hinder economic growth and increase recession risks, according to analysts.
  • The extension of the 90-day negotiating period by four weeks provides a brief respite from the trade war, but the ultimate outcome remains uncertain.

Statistics:

  • The S&P 500 slipped 0.1 percent on Tuesday, following its biggest loss since mid-June.
  • The Dow Jones industrial average gave back 0.4 percent on Tuesday.
  • The Nasdaq composite eked out a gain of less than 0.1 percent on Tuesday.
  • The price of copper for September delivery jumped 13.1 percent to $5.69 per pound.
  • Shares in Freeport-McMoRan rose 2.5 percent after President Trump's remarks on tariffs.

Sources:

  • "A choppy day in the markets left major U.S. stock indexes little changed on Tuesday..."

+ The New York Times article was not provided, but the text was given in the prompt.

  • "At a very basic level, nothing actually happened based on Trump sending these letters, so there's no reason to panic over headlines."

+ Tobin Marcus, analyst at Wolfe Research

  • "But we think these moves do contain some signal about where the trade war is heading, and that signal is mostly hawkish."

+ Tobin Marcus, analyst at Wolfe Research

  • "I think today you're basically seeing a market that doesn't quite believe the worst of this is going to come to bear and is just kind of waiting for any sort of clarity because we seem back in that in that kind of phase where things change every couple of hours."

+ Ross Mayfield, investment strategist at Baird

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