Money Wealth - Trump's tariffs caused a fall in the S&P 500

Futures for Wall Street’s main indexes tumbled on Monday as fears of a full-blown trade war and its impact on the global economy jolted markets around the world after President Donald Trump levied steep tariffs on Mexico, Canada and China.

Over the weekend, Trump imposed hefty new tariffs of 25 per cent on imports from Mexico and Canada, and 10 per cent on China – which he said may cause “short-term” pain for Americans.

“Breaking global trade may seem like the thing to do to resurrect the US industrial economy, a noble ambition, but, break trade and you disrupt global capital flows necessary to finance the US budget deficit,” an analyst at GlobalData.TS Lombard wrote in a note.

Trump said he would talk on Monday with the leaders of Canada and Mexico, which have announced retaliatory tariffs, but downplayed expectations that they would change his mind.

The iShares MSCI Mexico ETF lost 3.5 per cent in premarket trading, while an ETF tracking Canada slipped 2.2 per cent.

At 07:12 a.m. ET, Dow E-minis were down 612 points, or 1.37 per cent, S&P 500 E-minis were down 97.5 points, or 1.61 per cent and Nasdaq 100 E-minis were down 403.75 points, or 1.87 per cent.

Futures for the economically-sensitive Russell 2000 smallcaps index slumped more than 2 per cent.

Most chip stocks slumped, with industry bellwether Nvidia sliding 3.6 per cent, while other growth stocks lost ground, with Apple and Microsoft down more than 1 per cent each.

Legacy automakers Ford dropped 4 per cent, while General Motors shed 7.1 per cent. EV maker Tesla lost 3 per cent.

The Cboe Volatility Index, known as Wall Street’s “fear gauge”, jumped to its highest level in a week.

Trump also warned that tariffs on Europe will “definitely happen”, but did not offer any clarity over his plans. The pan-European STOXX 600 was last down 1.3 per cent.

Goldman Sachs estimates that every 5-percentage-point increase in the tariff rate would lower the S&P 500’s earnings per share by roughly 1 per cent to 2 per cent.

The brokerage said the latest tariff announcements could bring about a reduction in its forecasts for the S&P 500’s earnings by roughly 2 per cent to 3 per cent.

Meanwhile, the quarterly earnings remain in full swing, with some prominent companies including Google-parent Alphabet , chipmaker AMD, payments platform PayPal and drugmaker Eli Lilly reporting results this week.

Of the 178 companies in the S&P 500 that have reported earnings so far, more than 75 per cent of them beat analyst estimates, as per data compiled by LSEG.

Later in the day, a January manufacturing activity reading is expected. The January non-farm payrolls report is also due this week on Friday.

Among other movers, cryptocurrency and blockchain-related stocks dropped as bitcoin prices tumbled in a global risk-off move.

Exchange operator Coinbase and the largest corporate holder of bitcoin, MicroStrategy, tumbled almost 6 per cent each.

Triumph Group jumped 34.1 per cent after the aircraft parts maker said investment firms Warburg Pincus and Berkshire Partners have agreed to buy the company in a deal valued at about $3 billion.

Disclaimer: Moneywealth research provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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