Making sense of market moves
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Well, here we are again. And by here, we mean back to learning about high-stakes economic policy via social media posts.
Last night, President-elect Trump posted on Truth Social that he plans to impose 25% tariffs on all goods from Mexico and Canada as retaliation for illegal immigration, as well as “crime and drugs.” He will also slap an additional 10% tariff on goods from China, on top of an average 15% levy that has been in place since 2018.
Here’s how today’s tariff news is impacting the market, and which investments it’s hurting—or helping.
- Automakers such as General Motors, Chrysler, Jeep, Dodge, and Ford all plunged today given that a lot of auto parts are made in Mexico and would become more expensive with these tariffs.
- But Tesla’s stock rose—despite the fact that Tesla is supposed to build a gigafactory in Mexico.
- Although the region wasn’t named in the latest tariff tirade, European indexes still fell because stocks in the region are a prime tariff target—particularly European automakers.
- Despite the fact that high tariffs could force retailers to hike prices and are expected to cut consumer spending power by up to $78 billion, big-box stores such as Walmart and Costco were in the green today. Why? Compared to other retail giants, they still source most of their products domestically.
- Mexico’s peso and Canada’s dollar plunged this morning on the heels of Trump’s announcement. The US dollar, on the other hand, rallied.
- Tariffs could boost aluminum and steel prices in the US, largely because Canada and Mexico are major suppliers of those metals. In fact, Canada is the largest source of imported aluminum to the US.
More broadly, tariffs like these will probably re-inflate inflation. “We find that adding the tariffs on Canada and Mexico would likely lift core PCE inflation above 3% in 2025, with more marginal effects beyond,” wrote Justin Weidner, Deutsche Bank analyst, today.
But while today’s news may be moving markets at the moment, things are still just fine under the surface. “Tariff threats may trigger near-term market volatility, but the fundamental backdrop remains supportive,” explained CIO of UBS Solita Marcelli in a note today.
Keep in mind: These social posts are a long way from actual policy being implemented. And if Trump changes course, a lot of today’s gains and losses could be reversed.
Either way, we’ll keep you abreast of the latest policy updates—unless they’re posted while we’re off the clock.—LB