Trump’s announcement came after three days of gains for the S&P 500 index as hopes were dashed the tariff program would have a lighter touch. Traders across asset classes must now brace for what promises to be a grueling stretch of trade negotiations, against an economic backdrop that has shown signs of softening as companies and consumers adjust to Trump’s offensive.
Commodities that are sensitive to growth also fell. West Texas Intermediate, the US oil price, and copper, a popular measure of global output, both fell at least 2% early Thursday in Asia.
The White House said steel and aluminum imports won’t be subject to reciprocal tariffs in a move that will provide at least some relief to domestic buyers already incurring 25% duties on all imports of the key metals used in everything from automobiles to dishwashers.
Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps against Trump’s new set of tariffs. “As long as you don’t retaliate this is the high end of the number,” Bessent told Bloomberg Television.
The tariffs “should slow trade and raise prices squeezing profit margins,” said Michael O’Rourke at JonesTrading Institutional Services. “This will further slow a decelerating economy as it it creates friction and distortion in global trade. I think we need to expect retaliation, which will likely lead to further escalation.”
Among the gloom some saw pockets of optimism. To Steve Chiavarone at Federated Hermes, Wednesday’s announcement could mark the most draconian levels of tariffs, and subsequent trade negotiations could lead to lower rates, which would be good for markets.
“This may create enough of a selloff over the next day or so that it creates a buying opportunity,” Chiavarone said. “Worst case scenario today would’ve been a low rate with threats of escalation. I’d rather, at this point, have higher rates with the potential to deescalate.”
