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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: 295295

Reported Deaths: 6724
CountyCasesDeaths
DeSoto19672230
Hinds18799386
Harrison16710278
Rankin12685264
Jackson12592226
Lee9687160
Madison9457199
Jones7962146
Forrest7208136
Lauderdale6833226
Lowndes6022137
Lamar588080
Lafayette5733113
Washington5218130
Bolivar4609123
Oktibbeha441393
Panola430394
Pearl River4167130
Warren4129114
Pontotoc408869
Marshall403192
Monroe3989126
Union395374
Neshoba3807168
Lincoln3541102
Hancock347374
Leflore3375118
Sunflower318386
Tate302474
Pike300195
Scott293870
Alcorn291861
Itawamba289975
Yazoo289262
Tippah278765
Copiah277857
Coahoma277568
Simpson274878
Prentiss269758
Wayne253841
Marion252678
Leake252471
Covington248879
Grenada247377
Adams234377
George231745
Newton229652
Winston221675
Jasper213445
Tishomingo212365
Attala206569
Chickasaw201151
Holmes182270
Clay179150
Stone172429
Tallahatchie170539
Clarke169371
Calhoun157828
Smith152731
Yalobusha144836
Greene127633
Walthall124140
Noxubee122829
Montgomery122438
Perry121634
Lawrence120321
Carroll118225
Amite111533
Webster110630
Jefferson Davis101731
Tunica99023
Claiborne98429
Benton93324
Humphreys92827
Kemper90223
Quitman77114
Franklin76119
Choctaw69516
Jefferson62527
Wilkinson62426
Sharkey48817
Issaquena1676
Unassigned00

Alabama Coronavirus Cases

Cases: 493769

Reported Deaths: 9931
CountyCasesDeaths
Jefferson710731374
Mobile36139727
Madison32425455
Tuscaloosa24184410
Montgomery22586500
Shelby21968215
Baldwin19758283
Lee14967153
Morgan13667251
Calhoun13300286
Etowah13184319
Marshall11262209
Houston10104261
Elmore9385185
Limestone9363134
Cullman8897181
St. Clair8827223
Lauderdale8607211
DeKalb8459175
Talladega7523163
Walker6524255
Jackson6495102
Autauga627091
Blount6102127
Colbert6004118
Coffee5249102
Dale4642107
Russell404930
Franklin399177
Covington3960106
Chilton3876100
Escambia377672
Tallapoosa3588142
Clarke343650
Chambers3413110
Dallas3403141
Pike293472
Lawrence283484
Marion281995
Winston246867
Bibb245060
Geneva239970
Marengo236455
Pickens224654
Barbour211651
Hale210568
Fayette200756
Butler196866
Henry182441
Cherokee177038
Monroe166139
Randolph163740
Washington156535
Crenshaw144854
Clay144454
Macon142043
Cleburne137839
Lamar132833
Lowndes131151
Wilcox121825
Bullock116936
Conecuh106724
Perry105627
Sumter98531
Coosa88923
Greene88232
Choctaw55123
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