Markets Rattled as U.S.Tariffs Go Into Effect

Summary

WSJ What’s News: Markets Rattled as U.S. Tariffs Go Into Effect Episode Release Date: March 4, 2025

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1. Introduction

In this episode of WSJ What’s News, hosted by Alex Osola, The Wall Street Journal delves into the immediate aftermath of President Trump's implementation of new tariffs affecting international trade. The discussion centers on the economic repercussions, market reactions, international responses, and upcoming political developments.

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2. U.S. Tariffs Implementation and Market Reaction

At midnight on March 4, 2025, President Trump activated significant tariffs:

• 25% duty on goods imported from Canada and Mexico.
• 10% additional tariff on goods imported from China.

Trump’s administration justified these measures by citing concerns over immigration and the flow of illicit drugs, particularly fentanyl, into the United States. He stated that the tariffs would remain "until the crisis is alleviated."

Market Impact: The announcement sent shockwaves through global markets:

• Dow Jones Industrial Average closed down approximately 1.6%.
• S&P 500 fell by about 1.2%.
• Nasdaq ended the day roughly 0.4% lower, nearly approaching correction territory.
• The Wall Street fear gauge (VIX) saw an uptick, reflecting increased market anxiety.

Alex Osola notes, “Markets were rattled by the new levies and the countermeasures by Canada, Mexico, and China.”

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3. International Responses from Canada, Mexico, and China

Canada: Prime Minister Justin Trudeau announced retaliatory tariffs:

• 25% tariffs on nearly $100 billion of U.S. imports, including alcohol, clothing, and household appliances.

Trudeau criticized Trump’s actions, declaring, “Trump was acting in bad faith” and emphasized that “the American people will be hit by the effect of the tariffs” ([04:01]).

Mexico: President Claudia Sheinbaum indicated plans for retaliatory measures, stating, “There is no motive, reason, or justification for this decision” ([04:23]).

China: China imposed additional tariffs effective March 10:

• 15% tariff on U.S. chicken, wheat, corn, and cotton.
• 10% tariff on other agricultural products, including soybeans, pork, and dairy.

Additionally, China filed a World Trade Organization (WTO) lawsuit against the U.S. tariff increases and added over two dozen American companies to its export control and corporate blacklists.

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4. Economic Insights from WSJ Reporters

David Uberti on Market Sentiment ([01:53] - [03:23]): David Uberti describes the market sentiment as "negative to say the least." Despite only a 3% weekly decline across major indexes, investor confidence is eroding due to:

• The realization that tariffs are not serving as effective negotiating tools.
• Rising inflation expectations and decreasing growth forecasts.
• Specific sector downturns, particularly in financials and energy, driven by stalled mergers and acquisitions (M&A) activity and diminishing investor appetite.

Uberti adds, “There’s been this expectation and maybe wishful thinking that tariffs are this sort of ace negotiating tactic Trump might whip out to pursue new trade deals. And so to speak, that has turned out to be not the case.”

Gavin Bade on International Exposure ([05:35] - [07:07]): Gavin Bade highlights the vulnerability of Mexico and Canada due to their dependence on the U.S. as the primary export market. He warns of a significant economic shock to the entire North American economy and notes that this is just the beginning, with more tariffs slated for the following month across various sectors.

Bade states, “The US is the biggest export market for both Mexico and Canada. So this is all battle stations right now.”

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5. Impact on Consumers and Businesses

Consumer Impact: Wall Street Journal’s data news editor, Anthony DeBarros, explains that consumers might start feeling the price increases within a month as tariffs take effect. However, some mitigation is expected as companies had preemptively increased imports ahead of the tariffs.

Business Responses:

• Best Buy anticipates higher consumer prices due to increased costs in the supply chain, potentially reducing demand for electronics.
• Target forecasts that its sales for the year could remain flat amidst consumer uncertainty and the imposed tariffs.

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6. Upcoming Presidential Address and Key Points

President Trump is scheduled to address Congress in a speech modeled after the State of the Union, focusing on the "renewal of the American Dream." Key areas of scrutiny include:

• Plans to end the war in Ukraine.
• Justifications for government spending cuts and restructuring efforts led by figures like Elon Musk.
• Economic agenda, particularly the 25% tariffs on Mexico and Canada.
• Immigration policies and measures to reduce fentanyl-related deaths.

Claudia Sheinbaum emphasizes the need to listen for the Democratic response to Trump's agenda, noting the selection of Michigan Senator Slotkin to deliver this rebuttal.

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7. Additional News Highlights

Panama Canal Ports Acquisition: A consortium led by BlackRock has agreed to purchase majority stakes in ports located at both ends of the Panama Canal for nearly $23 billion, signaling a shift toward American corporate ownership. This move aligns with Trump’s objective to reclaim control over strategic trade routes, countering China’s Belt and Road Initiative.

Ukrainian President Zelensky’s Statement: Volodymyr Zelensky described his recent meeting with Trump as “regrettable” and expressed Ukraine’s readiness to negotiate peace and a mineral rights agreement with the U.S. However, it remains uncertain whether this will lead to the resumption of U.S. military aid to Ukraine, which was halted the previous day.

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8. Conclusion

The implementation of President Trump's tariffs has triggered significant market volatility, eliciting strong retaliatory measures from Canada, Mexico, and China. The economic outlook remains uncertain as additional tariffs loom, affecting various sectors and consumers alike. The forthcoming presidential address to Congress is poised to provide further clarity on the administration's trade and economic strategies amidst growing international tensions.

Produced by Anthony Banci and Pierre Bienname, with supervising producer Michael Kosmides. Presented by Alex Osola for The Wall Street Journal.

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Notable Quotes:

• Justin Trudeau ([04:01]): “Trump was acting in bad faith... the American people will be hit by the effect of the tariffs.”
• Claudia Sheinbaum ([04:23]): “There is no motive, reason, or justification for this decision.”
• David Uberti ([02:56]): “We are only down roughly 3% on the week across the major indexes... weakening consumer confidence, climbing inflation expectations and falling growth expectations.”
• Gavin Bade ([05:35]): “The US is the biggest export market for both Mexico and Canada. So this is all battle stations right now.”
• Claudia Sheinbaum ([09:16]): “We have not heard the President talk about inflation and prices as much since the campaign ended.”

Transcript

[Alex Osola]

Get the Angel REEF Special at McDonald's. Now let's break it down. My favorite barbecue sauce, American cheese, crispy bacon, pickles, onions and a sesame seed bun, of course. And don't forget the fries and the drinks. Sound good? Ba da ba ba ba.

[Gavin Bade]

I participate in restaurants for a limited time.

[Alex Osola]

Markets were rattled after President Trump's tariffs went into effect. Plus, Canada, Mexico and China announced counter and retaliatory steps.

[Gavin Bade]

This is only the first or second salvo of this trade war. We have a whole handful of tariffs coming up next month.

[Alex Osola]

And what to watch for when Trump addresses Congress tonight. It's Tuesday, March 4th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world. President Trump's tariffs, a 25% duty on goods from Canada and Mexico and an additional 10% tariffs on goods from China went into effect at midnight. The president has blamed Canada and Mexico for the flow of immigrants and illicit drugs like fentanyl into the US and said that tariffs are on, quote, until the crisis is alleviated. Markets were rattled by the new levies and the countermeasures by Canada, Mexico and China. Markets fell sharply earlier in the day, with the Nasdaq even flirting with correction territory, but then recovered somewhat to end the day lower. The Dow led the losses, closing down about 1.6%. The S&P 500 dropped roughly 1.2% and the Nasdaq ended the day about 0.4% lower. Wall Street's fear gauge also picked up after stocks slid today. With more on the market reaction, I'm joined now by WSJ reporter David Uberti. David, this was quite a day. What was the sentiment in the markets?

[David Uberti]

It was negative to say the least. I mean, we are only down roughly 3% on the week across the major indexes. That said, talking to investors today and yesterday is very clear that none of them like what is happening right now. There has been a weird dynamic in the market over the last, let's say four or five months since Donald Trump's election. There's been this expectation and maybe wishful thinking that tariffs are this sort of ace negotiating tactic Trump might whip out to pursue new trade deals. And so to speak, that has turned out to be not the case. And what we've seen this week is just that the market doesn't want that to happen. There's weakening consumer confidence, there's climbing inflation expectations and there's falling growth expectations. That's a pretty combustible mixture. And that's why everything on your screen is in the red. There are some people within the market that hope these tariffs could be off by tomorrow. There could be some masterstroke deal that happens between the governments of Mexico and Canada and the United States and so on. Until that happens, I think you will see this choppiness within the market.

[Alex Osola]

What were some of the sectors that were hit particularly hard today?

[David Uberti]

Today was financials. They, they led the S&P 500 downward. In addition to that, you had some, some pretty big losses from firms, including energy that plays into this broader macroeconomic outlook. The financial industry or the energy industry. Those could be paying the price of growth slows if M and A activity stalls and if investor appetite really starts petering out.

[Alex Osola]

That was WSJ reporter David Uberti. Thank you, David.

[David Uberti]

Thanks.

[Alex Osola]

As we mentioned, Canada, Mexico, and China responded today to the US tariffs. Canadian Prime Minister Justin Trudeau announced retaliatory 25% tariffs on nearly $100 billion of imported US goods such as alcohol, clothing, and household appliances in two waves. In an address, Trudeau said that Trump was acting in bad faith and called the concerns about border security and fentanyl trafficking that Trump used justify the new tariffs, quote, totally bogus. He said it'll be the American people who will be hit by the effect of the tariffs.

[Justin Trudeau]

I want to speak first directly to the American people. We don't want this. We want to work with you as a friend and ally and we don't want to see you hurt either. But your government has chosen to do this to you.

[Alex Osola]

Meanwhile, Mexican President Claudia Sheinbaum said she plans to announce retaliatory measures on Sunday. In her daily news conference, Sheinbaum said that there was no justification for the tariffs and pushed for cooperation. There is no motive, reason, or justification for this decision that will affect our peoples and nations. We have said it in different ways. Cooperation and coordination, yes. Subordination, interventionism, no.

[Claudia Sheinbaum]

No.

[Alex Osola]

Earlier, China said that it is imposing an additional 15% tariff on U.S. chicken, wheat, corn and cotton products and an additional 10% tariff on other agricultural products, including soybeans, pork, fruit, vegetables and dairy. These would go into effect on March 10. China's commerce ministry also said that it added more than two dozen American companies to export control and corporate blacklists. China added that it has also filed a lawsuit with the World Trade organization against the US's new tariff increase. Joining me now is WSJ economic policy reporter Gavin Bade, who is in the Senate press gallery. So, Gavin, how exposed are Mexico and.

[Gavin Bade]

Canada to These tariffs, they are quite exposed right now. I mean, the US Is the biggest export market for both Mexico and Canada. So this is all battle stations right now. This is a pretty big economic shock to the entire North American economy included.

[Alex Osola]

Has the US had any response to the other countries responding to the tariffs?

[Gavin Bade]

Mostly just that they will continue fighting this out until fentanyl deaths come down. I mean, it's been very difficult to know what exactly Trump wants to get these tariffs lifted. I just talked to Senator Bill Haggerty here in the Senate, one of Trump's closest allies talks to him often about trade and very often about fentanyl, because he's from Tennessee, big fentanyl problem there. And he said Trump is very serious about getting these fentanyl death numbers down. And I asked him, well, does he need to see them go to zero before these tariffs are lifted, or is a drop in the level of fentanyl deaths enough? And not even Haggerty knew that.

[Alex Osola]

If these tariffs go away, do we have any idea of what the effect might be?

[Gavin Bade]

You would see a big sigh of relief. You would see a bump in the stock market. You know, you would see a lot of relief in supply chains and markets if he was able to strike a deal on this. But remember, this is only the first or second salvo of this trade war. We have a whole handful of tariffs coming up next month on everything from automotive products to pharmaceutical products. And then Trump previewed some new agricultural tariffs yesterday that we have not heard any announcements about yet. So there's a lot more coming down the pike here.

[Alex Osola]

That was WSJ economic policy reporter Gavin Bade. Thank you, Gavin.

[Gavin Bade]

Thanks, Alex.

[Alex Osola]

So when will consumers feel the effects of tariffs? Not immediately. As Wall Street Journal data News editor Anthony DeBarros told our your Money Briefing.

[Justin Trudeau]

Podcast, we would start to expect to see prices on certain items be affected within the next month or so. Now, that said, a lot of companies that import goods spent a lot of money during December and January and February as well to bring in product ahead of the tariffs. So that could mitigate some of the immediate price impacts that we're talking about here.

[Alex Osola]

To hear more about how prices may change as a result of the tariffs, listen to tomorrow's episode of youf Money Briefing. Meanwhile, in their earnings reports, companies have already started talking about the effects of the tariffs. Electronics retailer Best Buy said today that U.S. consumers are likely to face higher prices as vendors throughout its supply chain react to the tariffs, a scenario that may crimp demand for electronics. And Target warned that its sales this year could be flat because of consumer uncertainty and tariffs. Coming up, five things to keep an eye on when President Trump speaks to Congress later this evening. That's after the break.

[Tarini Parti]

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[Alex Osola]

President Trump is expected to address Congress this evening in a State of the Union style speech. According to a White House official, the theme of the speech is the renewal of the American Dream. WSJ White House reporter Tarini Parti tells us what she's going to be listening for.

[Claudia Sheinbaum]

I'm going to be listening for a few things, the first being the President's plan to end the war in Ukraine. Another thing I'll be looking out for is how the President plans to sell what billionaire Elon Musk has been doing to voters, his efforts to shrink the government, to cut government spending. So this will be an opportunity for him to really explain why this is being done, why this is needed. We have not heard the President talk about inflation and prices as much since the campaign ended. This will be his opportunity to talk about his economic agenda, in particular the 25% tariffs on goods from Mexico and Canada that he moved ahead with today. The President has already done a lot on immigration. We'll hear a little bit more from the President on this issue. In particular, we're also going to be looking at the Democratic response. We have not heard as much from Democrats in terms of a cohesive opposition campaign since the President has taken office. And this will be a chance for Democrats to push back on the President's agenda. They have selected Michigan Senator Slotkin to deliver the Democratic response to Trump's address.

[Alex Osola]

In other news, President Trump wanted the US to retake the Panama Canal. A deal struck by BlackRock will give American investors control of ports on either end of the vital trade route, though not oversight of the canal itself. A group of investors led by BlackRock has agreed to buy majority stakes in ports on both sides of the Panama canal for nearly $23 billion. The deal would bring the key ports under American corporate ownership. The previous owner was Hong Kong based CK Hutchison. President Trump has said those foreign owned ports, along with infrastructure around the country that China helped build through its Belt and Road initiative violate the canal's neutrality. The last episode of our Building Influence series gets into what the US Is doing to respond to Beijing's infrastructure program and the clout that comes with it. That episode will be out Sunday, but you can catch the first two episodes on what Beijing is getting out of its trillion dollar campaign on the what's News feed now. And Ukrainian President Volodymyr Zelensky said his heated meeting with President Trump last week was, quote, regrettable on social media. He wrote that his country is ready to negotiate peace and to sign the mineral rights agreement with the U.S. senior U.S. officials say it is unclear if Zelensky's statement will be enough to convince Trump to restart US Military aid to Ukraine, which the White House halted yesterday. And that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Banci and Pierre Bienname with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.