Stocks drop after Trump announces 35% tariff on Canada
Context:
US stocks fell on Friday following President Donald Trump's announcement of a 35% tariff on Canada, which marked a significant escalation in the ongoing trade war. This move impacted the Dow, S&P 500, and Nasdaq, although the losses were relatively contained. Investors are showing a nonchalant attitude towards Trump's tariff threats, betting on the flexibility of these discussions and the possibility of negotiations. Despite the tariff announcement, stocks like Nvidia have continued to drive market gains, reaching record highs. Meanwhile, the market's fear gauge, the CBOE Volatility Index, has dropped, indicating a relatively calm market environment amidst ongoing trade tensions.
Dive Deeper:
President Trump's announcement of a 35% tariff on Canadian goods led to a drop in US stock markets, with the Dow falling by 226 points and the S&P 500 and Nasdaq experiencing smaller declines.
The tariff is set to take effect on August 1, and investors have reacted with relative calm, possibly due to expectations that the discussions remain flexible and may not lead to actual implementation.
Some investors view Trump's tariff threats as part of a negotiation strategy, with hopes that the US-Mexico-Canada free trade agreement might exempt certain goods from the increased tariff.
Despite the tariff threats, major tech companies like Nvidia have pushed the S&P 500 and Nasdaq to new highs, contributing significantly to market gains alongside other companies like Microsoft, Meta, Broadcom, and Amazon.
The market's fear gauge, the CBOE Volatility Index, has decreased significantly, reflecting a more stable market environment compared to the volatility seen in earlier months.
Though the current tariff threats have had limited immediate impact, there is concern among some investors about potential future effects on economic growth and business activity.
Bitcoin has surged past previous records, reaching over $118,000, as investors adopt a risk-on attitude in the face of ongoing trade tensions and market uncertainties.