📈 Trade War Returns?

Plus: What's next?

Author

Journals GG
February 03, 2025

Good morning!

Trump's sweeping tariffs have rattled stock futures and sent global auto stocks plunging, setting the stage for a volatile week as investors brace for key earnings reports from giants like Alphabet and Amazon.

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Markets

📉 Stock futures tank after Trump brings in sweeping tariffs
Stock futures took a hit, with Nasdaq 100 futures dropping 1.8%, leading the decline, while S&P 500 fell 1.6% and the Dow Jones slid 600 points (-1.4%). The selloff comes ahead of tariffs set to take place on Tuesday, including 25% duties on Canada and Mexico and 10% on China. Meanwhile, the US dollar hit a 12-month high, while crude oil prices spiked 2% in response. (We cover the tariffs in more detail later).

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🚗 Global auto stocks plunge on trade war concerns
Automakers took a beating Monday after Trump’s new tariffs on Canada, Mexico, and China sent shockwaves through the industry. Toyota and Nissan dropped over 5%, while Honda plunged 7.2%. Japan’s Mazda tumbled 7.5%, and Kia slid nearly 6%. In Europe, Valeo and Stellantis lost over 7.5%, while Volkswagen, Porsche, and BMW also took hits. Analysts warn the tariffs could disrupt supply chains and manufacturing, particularly in Mexico.

🤔 What To Expect in the Markets This Week
Investors are eyeing major earnings reports from Alphabet, Amazon, Disney, and weight-loss drugmakers Novo Nordisk and Eli Lilly this week. Meanwhile, the January jobs report drops Friday, with jobless claims and private payroll data also on deck. The Federal Reserve will be watching closely, with several officials set to speak on the economy.

🇪🇺 European and UK stock markets hit by worry
European markets tumbled early Monday after Trump’s tariff decision rattled investors. Germany’s DAX dropped 2%, while France’s CAC 40 slid 1.9%. Elsewhere, Spain’s IBEX fell 1.7%, and Italy’s FTSE MIB lost 1.4%, reflecting widespread market jitters.

Tariffs

President Trump’s new tariffs have sparked concerns about more than just immediate market jitters. With a 25% duty on imports from Canada and Mexico and a 10% increase in tariffs on Chinese goods, with more potential measures against the EU, the economic landscape could be facing some serious headwinds.

At their core, tariffs are taxes on imported goods. They make products more expensive, forcing companies to either absorb higher costs or pass them on to consumers.

This pressure can squeeze profit margins and disrupt supply chains. If these tariffs continue, the impact on earnings could be significant, particularly for companies in the S&P 500. Analysts warn that sustained tariffs might trim earnings growth by 2–3% and could potentially drag the index down by about 5% over the year as businesses struggle with rising costs.

Bitcoin, often seen as a hedge in uncertain times, isn’t immune either. Despite its reputation, the cryptocurrency has behaved like a typical risk asset lately. Prices have slipped below key support levels, suggesting that even digital assets are reacting to the broader economic uncertainty.

In short, while tariffs are meant to protect domestic industries, and there are certainly some pros, they also pose a real threat to stock performance and corporate earnings, affecting both traditional markets and cryptocurrencies alike.

The diagram from Investopedia below is a great quick summary of the pros and cons of tariffs.

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