Dow drops more than 400 points after Trump announces tariffs

Wall Street is worried about a trade war.The Dow dropped 420 points on Thursday after President Trump said his...

Posted: Mar 2, 2018 6:16 AM
Updated: Mar 2, 2018 6:16 AM

Wall Street is worried about a trade war.

The Dow dropped 420 points on Thursday after President Trump said his administration will impose tariffs on steel and aluminum imports. The Nasdaq and the S&P 500 declined 1.3% apiece.

Trump's controversial tariff announcement caught investors off guard and immediately raised concerns about retaliation from China or other major U.S. trading partners.

"This is the first shot across the bow over a trade war," said Art Hogan, chief market strategist at B. Riley FBR. "And nobody wins a trade war."

Trump said his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. It was not immediately clear whether Trump would exempt some countries from the tariffs, as his national security advisers have urged him to do to avoid hurting U.S. allies.

Corporate America has warned Trump that tariffs could backfire. Last month, the Business Roundtable warned of the risk of "foreign retaliation" that would "harm the U.S. economy."

Investors will be looking to see how U.S. trading partners react to the tariffs.

Beyond worries about retaliation, the tariff news drove concerns about rising costs for companies that rely heavily on aluminum and steel, like auto and plane makers. Imports make up about a third of the steel American businesses use every year, and more than 90% of aluminum used here. Shares of Boeing fell 3% General Motors dipped 4%, and Ford dropped 3%.

Related: NY Fed chief: Tariffs risk 'trade war'

If the tariffs result in higher prices on steel and aluminum, companies that rely on those products may pass on some of the costs to consumers. That raises the specter of creeping inflation.

"This clearly will [lead to] higher prices in the production chain, which is part of the inflation path," said Quincy Krosby, chief market strategist at Prudential Financial.

The timing of the tariff news surprised Wall Street. A formal announcement was expected at some point Thursday, but then it was called off. Later, Trump mentioned his tariff plans in a hastily arranged listening session with steel and aluminum executives. And he didn't provide crucial details, such as whether certain countries will be exempted.

Concerns about trade come at an already shaky time on Wall Street. The S&P 500 and Dow fell about 4% in February, their worst month in two years. Fears about inflation and soaring bond yields caused a surge in volatility, including two 1,000-point plunges for the Dow.

The market had come back as investors focused on the strong economy and booming corporate profits. But stocks fell sharply again on Tuesday and Wednesday, putting the Dow back in negative territory for the year.

Turbulence has picked up as well. The VIX volatility index spiked 15% on Thursday. Selling pressure will climb as volatility increases, Krosby said.

At least two corners of the stock market cheered Trump's tariff announcement. U.S. Steel and AK Steel soared 6% and 10%, respectively.

Century Aluminum also spiked 7%. Another major aluminum maker, Alcoa, gained 1%.

Trump's tariff moves could force investors to confront another trade issue: NAFTA. Trump has repeatedly threatened to tear up this major trade deal with Canada and Mexico. Talks to renegotiate NAFTA, a major piece of the U.S. economy, have so far failed to produce a solution.

"It sets off the protectionist fears that had been lying dormant," said Hogan.

- CNN's Jeremy Diamond contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 319948

Reported Deaths: 7371
CountyCasesDeaths
DeSoto22285267
Hinds20719421
Harrison18431317
Rankin13901282
Jackson13718248
Madison10263224
Lee10059176
Jones8467167
Forrest7832153
Lauderdale7261242
Lowndes6517150
Lamar635188
Lafayette6313121
Washington5425137
Bolivar4841133
Panola4670110
Oktibbeha466198
Pearl River4605147
Marshall4574105
Warren4440121
Pontotoc425873
Monroe4157135
Union415777
Neshoba4063179
Lincoln4008112
Hancock386987
Leflore3515125
Tate342486
Sunflower339491
Pike3371111
Alcorn327272
Scott320374
Yazoo314171
Adams308086
Itawamba305178
Copiah299966
Coahoma298784
Simpson298589
Tippah291968
Prentiss284161
Leake272074
Marion271280
Covington267283
Wayne264642
Grenada264087
George252251
Newton248663
Tishomingo231868
Winston230181
Jasper222148
Attala215073
Chickasaw210559
Holmes190474
Stone188433
Clay187954
Tallahatchie180041
Clarke178980
Calhoun174132
Yalobusha167840
Smith164134
Walthall135347
Greene131834
Lawrence131124
Montgomery128643
Noxubee128034
Perry127238
Amite126242
Carroll122330
Webster115032
Jefferson Davis108234
Tunica108127
Claiborne103130
Benton102325
Humphreys97533
Kemper96629
Franklin85023
Quitman82216
Choctaw79118
Wilkinson69632
Jefferson66228
Sharkey50917
Issaquena1696
Unassigned00

Alabama Coronavirus Cases

Cases: 548657

Reported Deaths: 11306
CountyCasesDeaths
Jefferson810031566
Mobile42105831
Madison35690525
Tuscaloosa26173458
Shelby25607254
Montgomery25081614
Baldwin21868314
Lee16278176
Calhoun14719327
Morgan14629285
Etowah14175364
Marshall12453230
Houston10781287
Elmore10293214
Limestone10179157
St. Clair10162251
Cullman9952201
Lauderdale9603250
DeKalb8972190
Talladega8460184
Walker7338280
Autauga7241113
Blount6945139
Jackson6932113
Colbert6413140
Coffee5635127
Dale4928116
Russell454841
Chilton4476116
Franklin431382
Covington4275122
Tallapoosa4138155
Escambia401680
Chambers3728124
Dallas3607158
Clarke353061
Marion3240107
Pike314378
Lawrence3133100
Winston283472
Bibb268564
Geneva257981
Marengo250565
Pickens236962
Barbour234559
Hale227278
Butler224271
Fayette218862
Henry194543
Randolph187544
Cherokee187345
Monroe180041
Washington170539
Macon163051
Clay160059
Crenshaw155957
Cleburne153444
Lamar146837
Lowndes142254
Wilcox126930
Bullock124342
Conecuh113630
Coosa111729
Perry108626
Sumter105732
Greene93634
Choctaw62125
Out of AL00
Unassigned00
Tupelo
Cloudy
77° wxIcon
Hi: 81° Lo: 77°
Feels Like: 78°
Columbus
Mostly Cloudy
82° wxIcon
Hi: 84° Lo: 76°
Feels Like: 92°
Oxford
Partly Cloudy
77° wxIcon
Hi: 83° Lo: 75°
Feels Like: 78°
Starkville
Partly Cloudy
82° wxIcon
Hi: 82° Lo: 76°
Feels Like: 92°
Your Monday will bring plenty of heat and humidity, which will fuel clusters of storms throughout much of your day. Some scattered midday and afternoon storms may be strong, though the greatest risk for severe storms will be in the evening as a cold front passes.
WTVA Radar
WTVA Temperatures
WTVA Severe Weather