Tariffs and The Stock Market: Why It All Matters

Tariffs have been in the spotlight. The stock market reacted to the news of tariffs on Monday. The S&P 500 dipped 0. 6% during midday trading, while the Dow Jones Industrial Average and Nasdaq composite saw a 0. 1% and 1% loss respectively. Asian and European markets, however, fared worse. The fear was clear: a potential trade war could cause significant economic damage. Trump's tariffs on imports from Canada, Mexico, and China sparked worries. These could lead to higher prices for everyday items like groceries and electronics. "Inflation could get tough. " The stock market didn't like it. Some of the biggest tech companies took a hit. Big Tech companies saw big losses. Tech giants such as Amazon, Apple, and Google also predicted higher interest rates will hurt them. Mexican President Claudia Sheinbaum announced tariffs on Mexican goods are on hold for a month. This announcement brought some relief to the stock market. The Dow Jones Industrial Average quickly reduced its losses from 665 points to just 39. The Federal Reserve's actions were tightly watched. The Fed had started cutting interest rates to boost the economy in September. But the tariffs could make inflation go up. This would make the Fed think twice before cutting rates again. There are fears about how long the trade war might last. People like Brian Jacobsen, chief economist at Annex Wealth Management, see the impact of tariffs locally. "Living in the Midwest, I might feel the trade war sooner than most. " He worries about the impact on crude oil prices. Crude oil prices jumped to $74. 50 per barrel before dropping to $72. 36. People in the Midwest might feel it more sooner than most. The Midwest is heavily dependent on crude oil from Canada. The potential pain from tariffs was acknowledged by Trump himself. He said Americans may feel some pain but it would be worth it. “Living in the Midwest, I might feel the trade war soonest and most, ” said Brian Jacobsen, chief economist at Annex Wealth Management. Companies that rely on global trade were hit hard. Constellation Brands, Best Buy, and Brown-Forman all saw significant drops in stock prices. Investors shifted towards government bonds, seen as safer investments. The 10-year Treasury yield fell to 4. 51% down from 4. 55%. Stocks and crypto investments took a backseat. Investors put there money in government bonds, which are seen as safe. The yield on the 10-year Treasury fell to 4. 51% from 4. 55% late Friday. Short-term Treasury yields rose Monday as expectations waned for cuts to rates from the Fed. The yield on the two-year Treasury rose to 4. 23% from 4. 21%. Higher yields put pressure on all kinds of investments, but they’re particularly burdensome on stocks seen as the most expensive. That puts the spotlight on companies like Nvidia and other winners of the artificial-intelligence boom. Trump’s tariffs took center stage in a week where other events would typically take the spotlight. The Federal Reserve cuts interest rates to boost the economy in September. But the tariffs could make inflation go up. This would make the Fed think twice before cutting rates again. The yield on the 10-year Treasury fell to 4. 51% from 4. 55% late Friday. That's a relief from the the recent climb in longer-term Treasury yields that have shaken Wall Street in recent months. The yield on the 2-year Treasury rose to 4. 23% from 4. 21% late Friday. As the stock market reacted to Trump's tariffs, other important news was sidelined. Inflation rates dropped since their peak three summers ago. If inflation goes up, it would force the federal reserve to reconsider their decision to cut interest rates. There is fear that Trump's tariffs will lead to higher prices for groceries and electronics. Wall Street didn't like the news. Higher interest rates will make the problem worse. Higher yields put pressure on all kinds of investments, but they’re particularly burdensome on stocks seen as the most expensive. Investor are worried about the impact of tariffs on the stock market. The real impact of Trump's tariffs on the stock market is still unclear. This uncertainty caused the market to take a dive. Will they last a week or a year? The answer remains uncertain.