Trade war fears: Stocks drop sharply again

President Trump says trade wars are good. Wall Street disagrees.The Dow fell as much as 391 points on Friday a...

Posted: Mar 2, 2018 1:58 PM
Updated: Mar 2, 2018 1:58 PM

President Trump says trade wars are good. Wall Street disagrees.

The Dow fell as much as 391 points on Friday after losing 420 points on Thursday. It recovered some of those losses and was down about 200 points at midday. The Nasdaq and the S&P 500 both sank 1% before recovering most of their losses.

The sell-off began after Trump announced that his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. Trump has not said whether some countries would be excluded from the tariffs.

For the market, "this really could be something new and worse than we have seen so far," said Brad McMillan, chief investment officer at Commonwealth Financial Network.

Trump's announcement caught investors off guard and raised fears about a tit-for-tat retaliation from China and other major US trading partners.

Top American partners, including Canada, Germany, the European Union and Australia, all denounced the move. The World Trade Organization is "clearly concerned," director general Roberto Azevedo said. "The potential for escalation is real."

On Friday, Trump elevated concerns about a full-blown trade fight even further by tweeting that "trade wars are good, and easy to win." That helped bring down stocks for the second day in a row.

"Markets hate uncertainty and we still don't know exactly who and by how much these tariffs will impact trade," said Ryan Detrick, chief senior market strategist at LPL Financial.

Related: Germany and other allies are really, really angry about Trump's tariffs

Corporate America has warned that tariffs will harm the economy and the market.

Costs could soar for American companies that rely on aluminum and steel produced overseas, such as auto and plane manufacturers and construction. Imports make up about a third of the steel American businesses use every year, and more than 90% of aluminum used here.

If the tariffs bring more expensive steel and aluminum, companies that rely on those materials may pass some of those costs to consumers. That raises the possibility inflation will creep up.

And if other countries decide to hit back with their own tariffs on US goods, export-dependent industries such as agriculture will become less competitive overseas.

Related: 'Trade wars are good?' Two words: Great. Depression.

Fears about inflation and rising bond yields caused a surge in volatility last month, including two 1,000-point plunges, as the Dow suffered its biggest losses in two years.

On the other hand, McMillan said, if corporations decide to eat most of those higher costs, their profit will take a hit, hurting their stock prices.

Shares of Boeing dropped 3% on Friday. General Motors and Ford slipped. And Caterpillar lost 2%.

The tariffs caused yields on U.S. bonds to fall on Thursday as investors sought a haven from volatile stocks. Yields and prices move in opposite directions. The 10-year Treasury was back up slightly Friday, to 2.83%.

Domestic steel and aluminum manufactures are the winners from Trump's tariff announcement.

U.S. Steel and AK Steel soared 6% and 10%, respectively, on Thursday. Century Aluminum spiked 7% Thursday.

All three gave back some of those gains on Friday. McMillan attributed their losses to investors not reading too much into Trump's tweets.

"This has the potential to get worse, but there's a long way to go before we have a trade war," he said. "What Trump says and what he does are often two different things."

Welles Orr, a former assistant US Trade Representative under President George H.W. Bush and a trade consultant, said the steel and aluminum industries are not immune to global backlash.

"This might look and make you feel good at the outset," Orr said. "But in the long run, it's going to hit so many industries."

The tariffs also raise doubts about the future of NAFTA, Orr added. Trump has threatened to tear up the trade agreement with Canada and Mexico. The three countries are in their seventh round of talks.

-CNN's Matt Egan contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 161516

Reported Deaths: 3916
CountyCasesDeaths
DeSoto10863104
Hinds10705207
Harrison7624114
Jackson6774131
Rankin6303114
Lee557798
Madison5311112
Forrest405587
Jones388589
Lauderdale3754149
Lafayette347358
Washington3421108
Lamar310350
Lowndes265168
Oktibbeha262763
Bolivar254686
Panola243754
Neshoba2333124
Marshall229451
Leflore216492
Monroe216278
Pontotoc213631
Lincoln203267
Sunflower198156
Warren189559
Tate187251
Union179626
Copiah176141
Pike170860
Pearl River168170
Itawamba166637
Scott166030
Yazoo164441
Alcorn161529
Coahoma160044
Prentiss159034
Simpson156954
Grenada149545
Adams148852
Leake146244
George138326
Covington137642
Holmes136861
Tippah135230
Winston134326
Hancock132842
Wayne127424
Attala126836
Marion126548
Tishomingo116444
Newton114929
Chickasaw112632
Tallahatchie101227
Clay98527
Clarke96954
Jasper90023
Stone85115
Calhoun82413
Montgomery80726
Walthall80430
Carroll78115
Lawrence76814
Smith76516
Yalobusha75728
Noxubee74817
Perry70127
Greene66023
Tunica64019
Amite61815
Jefferson Davis60818
Claiborne59716
Humphreys56119
Benton51018
Quitman5107
Kemper50019
Webster49514
Wilkinson42522
Jefferson39012
Franklin3866
Choctaw3757
Sharkey33517
Issaquena1254
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Alabama Coronavirus Cases

Cases: 264199

Reported Deaths: 3831
CountyCasesDeaths
Jefferson35310515
Mobile20626372
Madison14521153
Tuscaloosa13897173
Montgomery12844246
Shelby1127878
Baldwin9501138
Lee807167
Morgan740555
Etowah704870
Marshall695358
Calhoun6939126
Houston559140
DeKalb521843
Cullman490650
St. Clair466557
Limestone462446
Lauderdale452257
Elmore440070
Walker3914112
Talladega386157
Jackson373523
Colbert347948
Blount323146
Autauga294542
Franklin265534
Coffee260023
Dale247355
Dallas236832
Chilton235445
Covington234834
Russell23433
Escambia208832
Tallapoosa192692
Chambers189154
Clarke165422
Pike165215
Marion150236
Winston146325
Lawrence139936
Pickens129720
Geneva12929
Marengo127824
Bibb127038
Barbour121729
Butler121142
Cherokee108224
Randolph108022
Fayette102216
Hale102132
Clay95527
Washington94222
Henry9097
Monroe85311
Lowndes82930
Cleburne80914
Macon77522
Crenshaw73830
Lamar7348
Conecuh73215
Bullock71120
Perry7037
Wilcox65918
Sumter60122
Greene45818
Choctaw43620
Coosa3854
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