In the classic game of chicken, two drivers race towards each other until one loses their nerve and veers off the path. In Donald Trump’s rendition of this game, everyone incurs some form of damage.
Since the onset of his presidency, Trump has been probing the resilience of financial markets by dismantling governmental agencies, halting federal expenditures, and instigating a trade conflict with several economic partners. Investors have been trying to assess the extent of Trump’s disruption and whether it will lead to fleeting or enduring consequences.
Just shy of two months into his tenure, Trump has already veered the stock market into uncertain territory. The markets were relatively unphased when he levied his initial tariffs on Chinese imports in February, as the 10% duty was less than he initially threatened, and investors anticipated it.
The stakes escalated significantly during the week of March 3, when Trump declared an additional 10% tariff on Chinese imports along with a much steeper 25% tax on goods from Canada and Mexico. These two nations are America’s largest trading partners, and the 25% levy would dramatically increase the cost of nearly $1 trillion worth of products, including automobiles and parts, food, building materials, and energy.
Read more: What Trump’s tariffs mean for the economy and your wallet
The stock market reacted negatively. Trump quickly began to roll back the North American tariffs, providing temporary exemptions for essential product categories. Nevertheless, he maintains that further tariffs on European imports and other goods from nations he considers unfair trade partners are forthcoming.
At close: March 7 at 4:43:27 PM EST
Markets are currently factoring in more repercussions from tariffs than just a few weeks prior, along with increasing probabilities of a recession. The S&P 500 fell by 3.5% during the week of March 3, with Trump’s concession on tariffs providing little relief to the markets. U.S. stocks are lagging behind those in Europe and other global markets.
Investor sentiment regarding Trump’s economic policies is swiftly deteriorating. “Trump’s tariff scheme has descended into absurdity,” noted Capital Economics in a March 7 report. “For the record, Trump has imposed tariffs on Canada and Mexico, only to almost immediately reverse his stance twice within a month.” The research firm points out that since Trump’s temporary relief is only meant to last until April 2, further reversals are likely on the horizon.
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In light of Trump’s recent tariff measures, Goldman Sachs has lowered its economic growth forecast for this year from 2.2% to 1.7%. The firm also raised its inflation projection from 2.1% to 3%. Morgan Stanley has issued similar reductions. Trump’s approval ratings are also taking a hit, and this is prior to the March downturn. Meanwhile, Americans anxious about rising egg prices and other essentials were advised by Trump’s Agriculture Secretary Brooke Rollins on March 2 to consider raising chickens in their backyards.
