What a week, huh?
Yes, Liz Lemon, it’s only Wednesday, so there’s still a couple days left to see more fluctuation in both the financial markets and the U.S. trade policy. The indirect relationship is clear, though: When tariffs (or the threat of them) go up, the markets go down. And there’s a lot of downturn as President Donald Trump continues to embrace more and harsher protective trade actions.
Despite announcing late last week that he was postponing the implementation of tariffs on imports from Mexico and Canada, the president has kept his foot on the gas, saying that the reciprocal tariffs he mentioned in his joint address to Congress will still kick in on April 2. Then on Monday, China announced it was going to impose new tariffs on American agricultural products in retaliation for Trump’s blanket 10-percent duty on Chinese imports. This contributed to Monday’s selloff that saw significant losses in all the major indexes.
Things didn’t get much better on Tuesday, which also ended with both the Dow Jones Industrial Average and the S&P 500 down by the time markets closed. And it’s not just stock prices tumbling—the Wall Street Journal reports the junk bond market is seeing prices tumble as well. That’s all happening against the backdrop of trade action volatility. In response to the Canadian province of Ontario putting a 25-percent surcharge on electricity it exports to some border states, Trump announced (on Truth Social, of course) that the steel and aluminum tariff wall with Canada was getting 25 percent higher. By end of day on Tuesday, though, Commerce Secretary Howard Lutnick had apparently extended an “olive branch” to the Ontario premier, Doug Ford, who announced the province would pull back the surcharge and that further talks would smooth things over. By the end of the day, Trump reversed himself on that particular tariff hike.
All the while, Trump and the White House are arguing all of this market volatility is just the cost of making America great and prosperous again. White House press secretary Karoline Leavitt called tariffs a “tax cut for the American people” and accused a reporter who challenged that idea of “trying to test my knowledge of economics.” Trump, meanwhile, is trying to sound copacetic. “Markets are going to go up and they’re going to go down, but you know what? We have to rebuild our country,” the president told reporters Tuesday.
The question for the next few days, weeks, and months is how much “rebuilding” of the country will voters tolerate? Voters may start to voice their disapproval of Trump’s tariffs über alles approach if their retirement savings and stock portfolios continue to drop while prices for goods stay high.
—Michael
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