Trump Announces Additional 10% Tariffs on China Starting Day One
Mexico and Canada Face 25% Tariffs
GM and Ford with Canadian and Mexican Plants Decline
November FOMC Minutes Release Also in Focus
The three major indices of the U.S. New York stock market showed mixed trends in early trading on the 26th (local time). Investors are assessing the impact as President-elect Donald Trump has warned of a 'tariff bomb' on China, Mexico, and Canada. Market attention is also focused on the minutes of the Federal Reserve's (Fed) November Federal Open Market Committee (FOMC) meeting, which will be released later that afternoon.
As of 9:48 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average was down 0.47% from the previous trading day, standing at 44,524.72. The large-cap-focused S&P 500 index was up 0.25% at 6,002.32, and the tech-heavy Nasdaq index was trading 0.58% higher at 19,164.79.
The previous day, President-elect Trump posted on his social media platform, Truth Social, that on his inauguration day, January 20 next year, he would impose an additional 10% tariff on China and 25% tariffs on Mexico and Canada, respectively. He emphasized that these tariffs would remain in effect until the invasion of the U.S. by drugs such as fentanyl and illegal foreigners stops. As Trump signals a tough tariff policy, the market is cautiously evaluating its impact.
Justin Onuekwusi, Chief Investment Officer (CIO) at St. James Place, said, "We are only seeing the beginning of volatility, and if investigations continue, volatility will persist. It is very difficult to assess whether the tariffs are a threat, a promise, or a negotiating tool."
Adam Chrisafulli, founder of Vital Knowledge, assessed, "Investors do not fully believe that the tariffs will be implemented, and with earnings being quite good, Wall Street seems to be overlooking this (tariff imposition) news."
The market rallied, focusing on the announcement of Trump's second-term first Treasury Secretary nominee the previous day. Investors were relieved by the nomination of Scott Bessent, CEO of Key Square Group, a veteran Wall Street investor. This reflected expectations that Bessent would moderate Trump’s radical tariff hikes and tax cut policies. However, there is also cautious opinion that it remains to be seen whether he can exert real influence on tariff policies and others.
Cameron Dawson, CIO of NewEdge, said, "It takes time for such policies to actually be applied to the market," adding, "It is questionable how much short-term impact he (the nominee Bessent) will have as the year ends."
The market is also awaiting the November FOMC minutes, which will be released at 2 p.m. Eastern Time. The minutes are expected to contain the Fed officials’ assessments of the economy, outlooks, and views on future monetary policy paths. Investors are likely to seek hints about the Fed’s interest rate decision next month through these minutes. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market reflects a 56.2% chance that the Fed will cut rates by 0.25 percentage points at the regular FOMC meeting on December 17-18, and a 43.8% chance of holding rates steady.
By individual stocks, U.S. automakers General Motors (GM) and Ford are down 7.51% and 2.68%, respectively. Both companies have automobile production bases in Canada and Mexico. Global pharmaceutical company Amgen plunged 9.82% after its obesity treatment clinical trial results failed to meet market expectations.
Government bond yields are rising. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 4 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.3%. The 2-year Treasury yield, sensitive to monetary policy, is trading around 4.26%, unchanged from the previous day.
The dollar index, which measures the value of the dollar against six major currencies, is trading at 106.85, up 0.08% from the previous day.
International oil prices are rising. West Texas Intermediate (WTI) crude oil rose $0.55 (0.8%) from the previous trading day to $69.49 per barrel, and Brent crude, the global oil price benchmark, increased $0.49 (0.68%) to $72.97 per barrel.
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