Tariffs throw sand into the gears of global commerce and markets have long hated them. They hated them in the Depression, they hated tariffs in 2002, and the hated them at other times over the decades.
It should come as no surprise to anyone then that after markets ignored the looming threat of a trade war for months, that stocks have been selling off overnight as President Trump made good on his threat to levy 25% tariffs on Canada and Mexico, whose governments are launching retaliatory tariffs, and 10% on China.
Monday morning finds US index futures down 1.3% to 1.7% with NASDAQ futures leading the way lower. TSX futures are down 1.4%. The bigger impact of investors sentiment turning cautious, however, has been in cryptocurrencies, where Ether has plunged 13.5% and Bitcoin has dropped 3.5%. In overseas trading, Chinese markets held surprisingly steady, but Tokyo fell 2.6%, Sydney fell 1.8%, Frankfurt is down 1.6% and London is down 1.3%.
The US Dollar soared overnight but has given back some of its gains this morning. The Mexican Peso is currently down 1.3%, it had been down over 2.0% earlier. The Canadian Dollar is down 0.9%, as are the Euro and the Australian Dollar, suggesting traders are concerned about the impact of a trade war on everyone. Capital has started to rotate into historical safe havens. Gold and Silver are up 0.5% and 0.4% respectively while the Yen is down a relatively moderate 0.3%.
Commodity markets are having a mixed reaction to tariffs. Although President Trump levied a smaller 10% tariff on Canadian energy, Crude Oil is up 1.9% today while Natural Gas is up 8.2%. Metals, on the other hand, are getting hammered, particularly auto sector sensitive Platinum which is down 2.4%. Copper is down 0.5%.
Manufacturing PMI reports have been rolling out overnight and generally have been under 50 in contraction territory. The UK and Germany were not as bad as feared but Japan and Italy were worse than expected. Canada Manufacturing PMI (previous 52.2) is due at 9:30 am, followed by US ISM Manufacturing PMI (street 49.8) and US Construction Spending (street 0.1%) at 10:00 am. Alibaba and Palantir Technologies headline today’s earnings reports.