[New York Stock Market] Sharp Drop Amid Fatigue Over 'Fluctuating Tariffs'... S&P Hits Lowest in 4 Months

Trump: "Tariffs on Mexico and Canada Suspended Until April 2"
"Striking and Soothing"?Market Anxiety Spreads
Voosent: "This Is the America First Trade Policy"

The three major indices of the U.S. New York Stock Exchange all closed lower on the 6th (local time). Although the White House announced a temporary suspension of the 25% tariffs on Mexico and Canada, the stock market plunged sharply just one day after closing higher for the first time in three days, as investor caution spread due to trade policy uncertainties. The S&P 500 index fell to its lowest level in four months since early November last year, and the Nasdaq index dropped 10% from its peak, entering a so-called technical correction phase.

AFP Yonhap News

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 42,579.08, down 427.51 points (0.99%) from the previous trading day. The large-cap-focused S&P 500 index slid 104.11 points (1.78%) to close at 5,738.52, marking its lowest level since early November. The tech-heavy Nasdaq index plunged 483.48 points (2.61%) to close at 18,069.26, falling 10% from its recent peak.

By individual stocks, U.S. automakers declined despite the temporary tariff suspension on Mexico and Canada providing some relief. General Motors (GM) fell 2.64%. Ford dropped 0.41%. Semiconductor company Marvell Technology Group showed a disappointing outlook for the first quarter and declined 19.81%. AI leader Nvidia plunged 5.74%.

President Trump signed an executive order on that day exempting tariffs on all goods subject to the United States-Mexico-Canada Agreement (USMCA) imported from Mexico and Canada until April 2. This came just two days after the 25% tariffs, which had been temporarily suspended for one month on the 4th, were implemented. The White House had announced the day before, one day after the tariff strike, that tariffs on automobiles from Mexico and Canada would be suspended for one month, but then expanded the exemption to most items within a day. However, the tariff exemption deadline was fixed at April 2, the date President Trump had announced for reciprocal tariffs on each country.

The market closed higher for the first time in three days the previous day due to the tariff suspension on automobiles from Mexico and Canada, but closed lower that day despite the expanded exemption. This is analyzed as reflecting fatigue and anxiety caused by trade policy uncertainties that have continued since President Trump's inauguration.

Scott Voosent, U.S. Treasury Secretary and a Wall Street veteran, made remarks supporting tariffs that increased the decline. At a New York Economic Club event that day, Secretary Voosent said, "As the practices of other countries affect our economy and people, the U.S. will respond," adding, "This is the America First trade policy." He also directly called Canadian Prime Minister Justin Trudeau a "numbskull" and stated he would focus more on the real economy than Wall Street.

Keith Lerner, chief market strategist at Truist, said, "It's just confusing," and pointed out, "This confusion is permeating the market's everyday fluctuations."

Chris Lo, economist at FHN Financial, said, "With policies being implemented, challenged, changed, and often re-implemented, the only certainty now seems to be volatility."

Tariff uncertainties are also affecting corporate decision-making. According to the U.S. Department of Commerce, the trade deficit in January this year reached a record high of $131.4 billion. It is analyzed that this is the result of companies preemptively stockpiling imports due to President Trump's tariff strikes.

The U.S. Federal Reserve (Fed) wrote in its Beige Book economic report released the day before, "Manufacturing contacts, from petrochemical products to office equipment, expressed concerns about the potential impact of trade policy changes," adding, "Most contacts in various regions expected prices to rise due to potential tariffs and reported preemptively raising prices." The Institute for Supply Management (ISM) stated in its February Manufacturing Purchasing Managers' Index (PMI) report, "Customers (companies) are halting new orders due to tariff uncertainties," and "The administration has not provided clear guidance on tariff implementation plans, making it more difficult to predict business impacts."

The European Central Bank (ECB) decided on that day to lower the deposit rate by 0.25 percentage points from 2.75% to 2.5% annually due to weak exports and investment in the Eurozone (20 countries using the euro) caused by trade policy uncertainties.

The employment data released that morning showed slight improvement. According to the U.S. Department of Labor, new unemployment claims for the week of February 23 to March 1 decreased by 21,000 from the revised previous week's figure of 242,000 to 221,000. The expert forecast of 234,000 was also missed by 13,000.

U.S. Treasury yields showed mixed movements within a narrow range. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.29%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, moved down 1 basis point to 3.96%.