Stocks slumped late Friday and they’re sliding even more today. Crude oil, gold, and silver are modestly higher, while the dollar is surging and Treasuries are mixed.
Clearly, Wall Street isn’t happy about President Trump’s weekend tariff announcements. He slapped 25% tariffs on imports from Canada and Mexico, while also adding a 10% tariff on Chinese imports. The moves prompted Canada to announce retaliatory tariffs on $100 billion of US goods. Mexico is expected to take a similar step soon.
Stocks don’t like the news because they could induce “stagflation” in the US. In other words, inflation will likely rise while growth will likely slow – though the Canadian and Mexican economies will probably suffer more than the US economy will. The president also threatened the European Union with tariffs, though he hasn’t yet acted on that front.
SPDR S&P 500 ETF (SPY)
Outside of the stock market, investors responded to the moves by bidding up the US dollar and selling the Mexican peso and Canadian dollar. Interest rates are mixed along the yield curve today, though they rose broadly late Friday amid fears of tariff-driven inflation
Finally, the “Drill, baby, drill” rallying cry appears to be falling on deaf ears in the oil industry. While Trump wants producers to boost output, and is cutting regulation to encourage it, many domestic companies are reluctant to do so. Entreaties to foreign producers like Saudi Arabia appear to be getting rejected, too.
Why? I covered that topic in my recent MoneyShow MoneyMasters Podcast with energy-sector expert Robert Bryce. You can watch it here. It boils down to how badly producers got burned in the mid-2010s shale oil boom and bust. As for major foreign producers, they need oil prices to stay elevated so they can fund government programs and so their economies don't suffer.