Wall Street sell-off resumes after Trump announces new tariffs

Stay informed with free updates

Simply sign up to the Equities myFT Digest — delivered directly to your inbox.

Wall Street stocks extended their declines on Tuesday, as Donald Trump’s latest trade broadside against Canada reignited investor fears over the economic fallout from his protectionist agenda.

The S&P 500 was down 1.1 per cent by midmorning, while the Nasdaq Composite fell 1 per cent. Markets had initially steadied at the New York open following the previous day’s rout, but the sell-off resumed after Trump took to social media to announce an additional 25 per cent tariff on steel and aluminium imports from Canada, one of the US’s biggest trading partners.

In Europe, the Stoxx Europe 600 was down 1.8 per cent, while Germany’s Dax was 1.5 per cent lower.

The latest declines come after the Nasdaq fell 4 per cent on Monday, its worst day in two-and-a-half years, while the S&P index tumbled 2.7 per cent on fears of the economic impact of Trump’s global trade war.

“The US economy is turning sour and there doesn’t seem to be a ‘Trump put’ in sight for equities,” said Emmanuel Cau, an analyst at Barclays.

Shares in car companies also fell on Tuesday after Trump threatened in a separate post to “permanently shut down” Canada’s auto industry. Shares in Ford were down 2 per cent and General Motors off 3 per cent. Both have production sites in Canada. 

Tesla, which plummeted more than 15 per cent on Monday, was up 5 per cent at the open in New York but gave up those gains following Trump’s comments.

The US dollar, which has been dragged lower by concerns over the health of the world’s biggest economy, fell 0.5 per cent against a basket of six trading partners and is down 4.6 per cent since the start of the year.

The euro rose 0.7 per cent to $1.091, meaning it has now recovered almost all of its losses since the US election, as investors continued to bet on a better growth picture for Europe on the back of Germany’s “whatever it takes” spending plan announced last week.

The single currency was helped by the start of talks between US and Ukrainian delegations in Saudi Arabia that Kyiv hopes can pave the way for peace, and hopes that a defence deal in Germany will be sealed soon, said analysts.

Investors “just want to trade the positive narrative for euro at the moment”, said Kamal Sharma, an FX strategist at Bank of America.

The euro has had a lightning rally this month and saw its best week against the dollar since 2009 last week, as investors have increased growth expectations for the Eurozone and trimmed expectations for interest rate cuts by the European Central Bank.

Asian stocks, which opened sharply lower on Tuesday following the US sell-off, recovered some ground. Japan’s Topix and exporter-oriented Nikkei 225 index finished 1.1 per cent and 0.6 per cent lower respectively. China’s CSI 300 advanced 0.3 per cent.

The shifts followed big moves on Wall Street where investors were unnerved by the rhetoric from senior US administration officials about the equity market falls. Trump said there would be a “period of transition” as the economy adjusted to a global trade war.

Technology and industrial companies led the falls in Asia. Taiwan chip manufacturer TSMC was down 2.7 per cent and Korea’s Samsung Heavy Industries retreated 2.1 per cent.

Analysts said some investors were taking profits after the sharp rally in US tech stocks over the past year.

“The whole [US] tech sector has risen so much since last April, even with the correction now, it has still rallied a lot,” said Wee Khoon Chong, a senior markets strategist at BNY.

“People worry this is going to be a meltdown, but I don’t think so. When you have a new, better option, people adjust, valuations adjust.”