Looming trade war rattles Wall St
SAN FRANCISCO (Reuters) – The specter of a trade war started by US President Donald Trump rattled Wall Street on Thursday and exacerbated worries about inflation and the future of a nine-year bull market.
The S&P 500 slumped 1.33 percent after Trump said the US would impose duties on imported steel and aluminum, making good on promises to aggressively challenge China and other countries he blames for lost manufacturing jobs.
On Wall Street, Trump’s announcement exacerbated already-brewing concerns about inflation, which could push the US Federal Reserve to hit the brakes in coming months on an expanding US economy and spell the end to record-breaking stock price gains.
“In an environment where people are a little bit on edge concerning future inflation, tariffs don’t exactly mollify those concerns,” warned Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana.
News of the tariffs drove the stocks of US domestic steel and aluminum makers sharply higher, but the damage to stocks in other sectors was wide-ranging and illustrative of how broadly investors believe a trade conflict could damage the US economy.
US Treasury yields fell as some investors viewed debt as a safer bet than stocks, while the dollar fell to two-week lows against China’s currency.
About $323 billion evaporated from S&P 500 companies’ stock market value on Thursday. The stock market value of US steel companies that would benefit from the tariffs rose by $2 billion. Money managers pointed to steel and other materials stocks as among the few likely to benefit from any potential quarrel with China, the European Union, Canada and other trade partners.
“Tariffs haven’t worked historically and they cause retaliation. This is sort of working your way into a trade war which is a drag on the economy,” warned Art Hogan, chief market strategist at B. Riley FBR in New York.
Apple, which is intricately tied to China, dropped 1.75 percent. The largest US company by market capitalization manufactures its iPhones in China and receives a fifth of its overall revenue from there.