President Donald Trump told reporters on Friday nothing can be done by Canada, Mexico and China to forestall tariffs, adding that something "very substantial" was planned for tariffs on the European Union.
Trump promised tariffs on chips, and said oil and gas tariffs are likely by Feb 18. The White House said Trump on Saturday will implement tariffs of 25% on Canadian and Mexican imports and 10% on Chinese goods with immediate effect.
Trump acknowledged that tariff costs are sometimes passed along to consumers, and said his plans may cause a short-term disruption. But the Republican president told reporters in the Oval Office that he was not concerned about the reaction of financial markets.
MARKETS:
The S&P 500 (.SPX) turned lower on the tariff comments, ending down 0.5%. The Nasdaq (.IXIC) ended 0.28% lower. The euro ended 0.28% lower at $1.0361. The Mexican peso < MXN=> strengthened 0.19% versus the dollar at 20.706. The Canadian dollar weakened 0.42% versus the greenback to C$1.45 per dollar.
COMMENTS:
ERIC CLARK, PORTFOLIO MANAGER, RATIONAL DYNAMIC BRANDS FUND, SAN DIEGO
“The market is an anticipatory mechanism. Companies that could be affected have all been trying to anticipate what they expected would happen when Trump won. If a company knows that at some level would be some tariffs, my guess is that you’re pulling orders forward. Everybody knows Trump’s playbook, and because of that, he’s probably going to have to change a bit if he’s smart. It will not shock me when these leaders call his bluff, which will create more short-term volatility as negotiations happen behind the scenes. If this becomes a leadership spat, then that’s a bigger problem – and the next thing we have economic growth stalling and inflation on the margin climbing. That will create a difficult market for investors, and for the Fed. It creates a lot of noise and uncertainty, and uncertainty can make companies and consumers pause a bit and that could create some slackening of consumption and growth.”
JIMMY LEE, CEO, THE WEALTH CONSULTING GROUP, LAS VEGAS
“This is still a negotiating position. If he causes a little volatility I’d say ‘ buy the dips’.
"We’re very bullish for this year … These are the kinds of things that can create volatility that are good to invest into.”
GORDIAN KEMEN, HEAD OF EM SOVEREIGN STRATEGY (WEST), STANDARD CHARTERED BANK "We have been cautious on Mexico mainly because of the tariff threat, which we believe will be headwinds and a source of volatility, not just for Mexico, but for Latam FX and rates as well.
"We will have to wait what the exact details of the tariff announcement are, likely (Saturday). In particular, we need to know whether there are conditions attached which would allow Mexico to avoid these tariffs and whether these can be met realistically. If these conditions are achievable for Mexico we think there would be room for the market to rally."
DANIEL SKELLY, HEAD OF MARKET RESEARCH & STRATEGY TEAM, MORGAN STANLEY WEALTH MANAGEMENT, NEW YORK
"We’ve cited the potential for volatility surrounding tariffs, and today we saw it play out in the markets. As was the case for Monday’s AI news, it remains to be seen how the markets will absorb this development on a longer-term basis. There are still many unanswered questions, and the picture could look very different in the coming days. Overall, though, this week has been a reminder of how unexpected events can quickly shift market perceptions."
PRAMOL DHAWAN, HEAD OF EM PORTFOLIO MANAGEMENT, PIMCO
"Despite the turbulence, we believe Mexico is poised to emerge over the longer term as a net winner in this scenario. The Mexican government has made a decisive move by implementing restrictions on Chinese textile imports, clearly signaling its alignment with the US. They've ramped up efforts to tackle migration and are intensifying operations against fentanyl and drug trafficking. Unlike with the first Trump administration, there’s no longer an element of surprise; Mexican authorities are ready to negotiate and collaborate with the U.S. Even if a 25% tariff is imposed, we believe it’s unlikely to stick around for long. The extensive integration of supply chains and the necessity for cooperation at the border make it impractical. Once those tariffs fade, Mexico stands to gain significantly from nearshoring, positioning itself as a strategic partner rather than a competitor."
CHUCK CARLSON, CHIEF EXECUTIVE OFFICER, HORIZON INVESTMENT SERVICES, HAMMOND, INDIANA
“I'm not surprised. I would be very surprised if (the tariffs) are in place two weeks from now. In other words, I think Trump had to do this because he said he would.”
“But I also think they'll be looking for a win or some stated win to get out of it. So I think the market selling off because of this I thing, it’s offering more of an opportunity because I don't think these (tariffs) are going to be long lasting in nature.”
“(Canada and/or Mexico) will either blink or there will be a spin that they blinked.”
“In other words, to allow the administration basically to claim a victory and then undo them.”
“They're not nitwits, and they know if 25% stays in place a substantial period of time, that's not good for anybody and especially some industries here like autos and so forth.”
“Tariffs have really been used as a cudgel, weaponized for political purposes. This is Trump saying he’d do it, so he had to do it. But he didn't say for how long.”
LAWRENCE GILLUM, CHIEF FIXED INCOME STRATEGIST, LPL FINANCIAL, FORT MILL, SOUTH CAROLINA
“There was a hesitancy in markets to believe that tariffs were actually going to take place, but markets are now reacting to the news … The concern about tariffs is also if there’s retaliation and you get into a trade war. That could be inflationary and/or negative for economic growth”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO
"After a series of false dawns, hope that Donald Trump wouldn’t implement tariffs on Canada and Mexico on February 1 has been extinguished. But traders remain convinced that the president intends to use trade levies as negotiating instruments, and few expect them to remain in place for long, given the damage that could be inflicted on the US economy itself."
"Until a resolution has been achieved, currency markets could continue to see whipsaw price action and directional trends will remain beholden to the latest pronouncements from the White House."
DUSTIN REID, CHIEF STRATEGIST, FIXED INCOME, MACKENZIE INVESTMENTS TORONTO
“We’ve seen only a minor selloff in the U.S. markets; perhaps we’re still in a bit of a ‘show me’ phase here because there have been so many headlines in the first weeks of this presidency that the market does want some degree of certainty and clarity before making tectonic shifts. Right now, nobody knows what’s excluded or included, which suggests to many of us that the policymakers are still cobbling together the specifics, that the finer details are literally being hashed out in real time. For instance, I’ve heard speculation that Canadian oil will be hit off the bat, and that oil and gas will face tariffs but not until February 18th. Definitely, the Canadian fixed income market is reacting more strongly, with yields quite a bit lower and the market pricing in more significant and earlier rate cuts by the Bank of Canada.”
ALEX MORRIS, CHIEF INVESTMENT OFFICER, F/M INVESTMENTS, WASHINGTON, DC
“My first comment to the team was ‘round one to Lutnick.’ Howard Lutnick, in his hearings to be approved as Commerce Secretary, had said that tariffs were inflationary, whereas Scott Bessent, the incoming Treasury Secretary, told members of Congress in his hearing that he didn’t think they were. And as soon as the news hit, breakeven inflation expectations took off. But this is yet another policy that so far lacks specificity. What tends to emerge is a much watered down version of an initial plan. The Trump approach always is to put out an extreme scenario to get people to the table. Once they’re there, he may still throw his toys out of the pram, but still he’s likely to be more conciliatory. After all, Canada and Mexico are not entirely powerless in this scenario. It will not end well for Trump if the price of dishwashers goes up 25%. He ran on cutting inflation, and will need a quick win on that front, which is less likely if big tariffs are imposed.”
