Financial markets remain jittery. Tariffs on imports from 86 such tariff countries, including China, that go into effect just after midnight on Wednesday. This announcement follows a wild four-day stretch for stocks. In the nearly two months since then, the Dow Jones Industrial Average has dropped more than 4,500 points, marking one of the biggest crashes in recent history.
The latest tariffs will create an average of 104% new tariff on imports from China. Further, they will apply to non-compliant vehicles that miss compliance deadlines set out under the USMCA. Fully assembled vehicles crossing the border from the U.S. into Canada are required to comply with USMCA provisions. If not, they’ll face heavy new tariffs. The imposition of these new tariffs will start at midnight. This announcement set off alarm bells amongst investors and industry leaders.
As American businesses and consumers prepare for the soon-to-be-announced tariffs, China and other nations are preparing to respond in kind. As you might recall, Canada has recently doubled down on their threat to apply a 25% retaliatory tariff on U.S.-made cars. This decision would dangerously exacerbate U.S.-China bilateral tensions. Such retaliation would deepen the deterioration of U.S. trade relations and exacerbate market uncertainty.
Of all U.S. business sectors, the tech sector is the one most exposed to the new tariffs. As we know, Apple has become a dominant force in the technology industry. It will still have to absorb a lot more costs from the incoming tariffs on Chinese imports. The company faced many hurdles as it nears the rollout of these tariffs. That has led to widespread worry over its future profitability and upcoming stock performance.
Analysts largely warned of the negative day after impact from the new tariffs. “Our base case is tariffs will, over time, drift lower than today’s level but stay off the charts – at the highest levels of our lifetimes,” stated Piper Sandler analyst Andy Laperriere. This expression embodies the anxiety and doubt that so many investors are experiencing as they walk, or tiptoe, through a renewed unpredictable market environment.
The effect of these tariffs goes beyond the specific companies and affected sectors. It has wreaked havoc on larger market indices as well. Over the last four days of trading on the S&P 500, a -12% chance doesn’t sound very lucky. In the meantime, the Nasdaq Composite index has suffered an even larger 13.5%-plus fall. These numbers illustrate just how deep tariff-related catastrophes run throughout the entire economy.
As midnight draws closer, customs officials are gearing up for this action. They are scheduled to begin collecting these new tariffs on imports from 86 impacted countries. These tariffs are sure to raise prices for American consumers and businesses. Combined with the QT policy, this hike is likely to create significant inflationary pressures that reverberate across the economy.
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