New York Stock Market Falls on Trump Steel Tariff Announcement... Focus on Powell's Remarks

Trump Imposes 25% Tariff on Steel and Aluminum Without Exceptions
EU Announces Retaliatory Tariffs, Heightening Trade Tensions
Powell to Testify Before Congress for Two Days; All Eyes on His Message
CPI, PPI, and Retail Sales Data to Be Released Starting the 12th

The three major indices of the U.S. New York Stock Exchange were down in early trading on the 11th (local time). Concerns over a global trade war escalated as U.S. President Donald Trump officially announced a 25% tariff on steel and aluminum products. Investors are cautiously awaiting the testimony of Jerome Powell, Chair of the U.S. Federal Reserve (Fed), before Congress later that morning.

As of 9:35 a.m. in the New York stock market, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was down 0.19% from the previous day at 44,386.54. The S&P 500, centered on large-cap stocks, fell 0.22% to 6,053.24, and the tech-heavy Nasdaq Composite dropped 0.25% to 19,665.88.

President Trump's "tariff bomb" on steel and aluminum is weighing heavily on investor sentiment. He signed a proclamation the day before imposing a 25% tariff on all steel and aluminum products imported into the U.S. He stated, "We are simplifying tariffs on steel and aluminum today," adding, "A 25% tariff will be imposed on all aluminum and steel without exceptions or exemptions." During his first term, Trump applied Section 232 of the Trade Expansion Act to impose a 25% tariff on steel products and a 10% tariff on aluminum products for national security reasons. At that time, some exceptions were granted to countries including South Korea, but this time, a uniform 25% tariff will be applied to all steel and aluminum imports without exceptions, effective from the 12th of next month.

He also hinted at imposing tariffs on semiconductors, automobiles, and pharmaceuticals. President Trump said, "Over the next four weeks, we will probably have weekly meetings regarding tariffs," adding, "In the coming weeks, we will look into not only steel and aluminum but also semiconductors, automobiles, pharmaceuticals, and a couple of other items." Furthermore, he reiterated plans to announce as early as today the imposition of "reciprocal tariffs," which would apply the same tariff rates to foreign products as those imposed by other countries on U.S. goods.

As a result, concerns about the expansion of a global trade war are growing. The European Union (EU) has announced retaliatory tariffs in response.

Christian Mueller-Glissmann, Head of Asset Allocation Research at Goldman Sachs, said, "The best approach in asset allocation is to find assets that can protect you," adding, "The biggest problem is that tariffs are very specific, so it will become much more difficult from now on."

Meanwhile, investors' attention is focused on Chair Powell, who will appear before Congress for the semiannual monetary policy report over two days starting today. As President Trump's tariff policy becomes more concrete, Powell is expected to face numerous questions regarding the impact on the U.S. economy and monetary policy, including inflation. Powell faced public pressure to cut interest rates shortly after Trump's inauguration. Regarding this, Treasury Secretary Janet Yellen stated last week that the White House would not pressure the Fed to cut rates and would focus on policies to lower the yield on the 10-year U.S. Treasury note.

Major economic indicators will also be released consecutively this week. On the 12th, the Consumer Price Index (CPI) will be announced, followed by the Producer Price Index (PPI) on the 13th. Last month's CPI is expected to have risen 2.9% year-over-year, and the PPI is forecasted to have increased 0.2% month-over-month, maintaining the previous month's growth rate. Retail sales for January, to be released on the 14th, are expected to have stalled at the same level as the previous month. December retail sales rose 0.4% month-over-month.

By stock, shares related to the steel and aluminum tariff announcement are on the rise. U.S. Steel is up 0.49%. Nucor is up 1.81%. Cleveland-Cliffs and Alcoa have risen 1.77% and 1.83%, respectively. Coca-Cola surged 4.38% after reporting better-than-expected earnings for the fourth quarter of last year.

Bond yields are rising. The U.S. 10-year Treasury yield, a global benchmark for bond yields, rose 4 basis points (1 bp = 0.01%) from the previous trading day to 4.53%, while the 2-year Treasury yield, sensitive to monetary policy, increased 2 basis points to around 4.29%.