U.S. and Global Markets Remain Under Pressure Despite Delay In Mexico Tariffs

Alexander Garcia
03 Feb, 2025
Miami

Stock market indexes rebounded from Monday's worst losses after the U.S. delayed tariffs on Mexico. 

Mexico's president, Claudia Sheinbaum, said her nation will rush an additional 10,000 troops to the border and stem the flow of migrants and dangerous drugs. 

The S&P 500 index declined 1.7%, and the Nasdaq Composite dropped 2.2% in Monday's trading after the U.S. slapped tariffs on imports from its three largest trading partners. 

Over the weekend, the U.S. imposed 25% tariffs on imports from Mexico and Canada and imposed an additional 10% tariff on manufactured goods from China. 

The move is likely to cover $1.2 trillion, or about half of all imports, and could raise as much as $240 billion over a year for the federal government.

Tariffs paid by the U.S. importing companies are generally passed on to American consumers in the form of higher prices.

The Republican Party in the past had staunchly advocated free trade and decried trade barriers and tariffs, but as the party supports higher indirect taxes on all citizens to pay for tax cuts for the wealthy donors.

The U.S. imports about $1.2 trillion of goods from its three largest trading partners, and the world's largest economy has run deficits for decades with its six key trade partners—Mexico, Canada, China, the European Union, Japan, and Korea.

The U.S. has run an annual trade deficit since 1964 and rarely bothered to focus on improving its trade competitiveness, as the dollar's reserve currency status provides an advantage that no other country enjoys. 

Market confidence in the Trump administration has substantially evaporated, and global financial markets are roiled from New York, Frankfurt, to Tokyo after the newly appointed presidential administration's actions aim to make political points at the expense of relationships with trade partners and allies.

Stock market indexes are likely to lack direction in the week ahead, and the Federal Reserve is likely to take a cautious view and keep rates higher for longer amid heightened political uncertainty and inflationary policies of the new administration. 

On Wall Street, investors will shift focus to the fresh batch of earnings this week, including updates from Amazon, Alphabet, Qualcomm, Pfizer, Pepsi, Walt Disney, Uber, and AMD.

On the economic front, nonfarm payrolls growth in January is expected to slow to 175,000 from 256,000 in December. The jobless rate is likely to hold steady at 4.1%, and wage gains are likely to remain near an annual rate of 4.5%.

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.9% to 5,991.46, the Nasdaq Composite edged down 1.2% to 19,389.70, and the Russell 2000 index fell 1.1% to 2,263.35.

The yield on 2-year Treasury notes edged higher to 4.25%, 10-year Treasury notes declined to 4.51%, and 30-year Treasury bonds dropped to 4.74%.

WTI crude oil increased $1.83 to $74.36 a barrel, and natural gas prices edged higher by $0.27 to $3.32 a thermal unit.

Gold rose by $19.54 to 2,816.75 an ounce, and silver edged up by $0.26 to $31.53.

The dollar index, which weighs the US currency against a basket of foreign currencies, climbed 0.63 to 108.99 and traded at a two-year high.

 

U.S. Stock Movers 

Automobile and parts makers after the announcements of new tariffs on imports from the three largest trading partners. 

U.S. automobile production relies on a highly integrated supply chain network spanning from Mexico to Canada, and several parts cross borders multiple times before they are sold to consumers in North America. 

General Motors declined 6.5% to $46.32, Ford Motor dropped 3.7% to $9.71, Stellantis NV decreased 4.9% to $12.53, and Tesla dropped 3.6% to $390.02.

Aptiv declined 3.6% to $59.38, Avery Dennison fell 2.2% to $180.71, and Cummins Inc. decreased 3.2% to $345.15.

Chipotle Mexican Grill declined 2% to $57.31 after avocado shipments from Mexico face 25% tariffs as early as Wednesday. 

Constellation Brands declined 4% to $170.09 after the alcoholic beverage importer and distributor faced higher product costs from Mexico. 

 

European Markets Tumble 2% After U.S. Targets EU and Key Trading Partners for Tariffs

Stock market indexes in Europe dropped sharply amid a growing realization that the region's exports are likely to face higher trade barriers to the U.S. 

Benchmark indexes in Paris, Milan, Frankfurt, and London plunged between 1.3% and 1.7% after the U.S. slapped tariffs on shipments from its three largest trading partners. 

The latest measures include 25% tariffs on all manufactured goods from Mexico and Canada and an additional 10% tariffs on goods imported from China. 

The U.S. imports about $1.2 trillion of goods from its three largest trading partners, and the world's largest economy has run deficits for decades with its six key trade partners—Mexico, Canada, China, the European Union, Japan, and Korea.

The European Union exports over €500 billion in goods to the U.S. and imports about €345 billion from the world's largest economy, resulting in a trade surplus of €155 billion. 

The European Union's average annual trade surplus has ranged between €100 billion and €160 billion since 2015. 

In 2023, the United States was the largest partner for EU exports of goods (19.7%) and the second largest partner for EU imports of goods (13.7%), according to the latest annual statistics available from Eurostat.

Among EU member states, the Netherlands was the largest importer of goods from the United States, and Germany was the largest exporter of goods to the United States in 2023.

Tariffs are federal government taxes on foreign goods paid by U.S. consumers, and the new round of trade barriers will certainly stoke inflation and force the U.S. Federal Reserve to keep rates higher for longer.

The newly appointed Republican Party administration is seeking a halt of all illegal migrants from its two neighboring partners and curtailing of illegal shipments of dangerous drugs.

 

Europe Indexes and Yields

The DAX index decreased by 1.6% to 21,378.03; the CAC-40 index dropped 1.5% to 7,831.65; and the FTSE 100 index declined by 1.2% to 8,569.99. 

The yield on 10-year German bonds inched lower to 2.43%, French bonds declined to 3.15%, the UK gilts moved down to 4.54%, and Italian bonds edged higher to 3.56%.

The euro declined to $1.02; the British pound was lower at $1.23; and the U.S. dollar was higher and traded at 91.92 Swiss cents.

Brent crude increased $0.88 to $76.55 a barrel, and the Dutch TTF natural gas was higher by €0.17 to €49.91 per MWh.

 

Europe Stock Movers

Automobile makers and advanced semiconductor equipment makers led the decliners across Europe in Monday's trading. 

All leading automobile makers in the European Union declined, led by Mercedes-Benz Group AG, which fell 4.3% to €56.39; BMW plunged 4% to €75.42; Volkswagen AG dropped 5.8% to €95.55; and Stellantis NV fell 6% to €12.19.

Among leading tech equipment companies, Infineon Technologies AG decreased 4.2% to €30.74, and ASML Holding dropped 2.7% to €702.80.

Julius Baer Gruppe AG dropped 11% to CHF 56.70 despite the Swiss wealth management company posting strong fiscal year 2024 results, boosted by a substantial tax release.

The Swiss asset management company's new chief executive announced plans to trim its workforce by 5% as the company looks for ways to lower its operating costs. 

 

India and Global Market Indexes Drop After the U.S. Launched Trade War

Financial markets in India were under pressure after the U.S. imposed additional tariffs on its three largest trading partners, starting a trade war that will accelerate the redesign of the global supply chain. 

The latest measures include 25% tariffs on all manufactured goods from Mexico and Canada and an additional 10% tariffs on goods imported from China. 

The U.S. imports about $1.2 trillion of goods from its three largest trading partners, and the world's largest economy has run deficits with its key partners for decades. 

Tariffs are federal government taxes on foreign goods paid by U.S. consumers, and the new round of trade barriers will certainly stoke inflation and force the U.S. Federal Reserve to keep rates higher for longer.

The newly appointed Republican Party administration is seeking a halt of all illegal migrants from its two neighboring partners and curtailing of illegal shipments of dangerous drugs.

The Sensex and the Nifty indexes dropped about 1%, and benchmark indexes in Seoul, Korea, and Tokyo, Japan, plunged 3%. 

Markets in Shanghai and Shenzhen China, are expected to reopen 2% lower after investors return from the Lunar New Year holidays on Wednesday. 

Financial markets in Europe are likely to open 1.5% down, as investors fear that the European Union is likely to face between 10% and 25% tariffs as early as April 1.

The U.S. presidential administration is targeting all leading trading partners with trade surpluses, including Japan, South Korea, Taiwan, Brazil, and India. 

India has about $42 billion in trade surplus with the U.S.; however, it is not clear how the U.S. plans to impose tariffs on services exports.

The newly-announced tariffs are scheduled to be imposed from Tuesday, and will impact about 50% of total goods imports arriving to the shores of the U.S. 

Canada announced its own measures of tariffs and trade restrictions on U.S. exports, covering a wide range of goods in the automobile industry, agricultural products, and wine and alcohol. 

Mexico plans to impose its own set of trade tariffs and restrictions, and China said it will take "appropriate measures" and mount a legal challenge questioning the legality of the move. 

 

Stock Indexes and Bond Yields

The Sensex index decreased by 0.9% to 76,825.15, and the Nifty index declined by 1% to 23,249.55.

On the Mumbai stock exchange, 46 stocks traded at their 52-week highs, and 73 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds inched lower to 6.7%, and the Indian rupee hovered near a record and traded at 87.17 against the U.S. dollar.

The gold price decreased by 0.05% to ₹82,261 per ten grams and rose by 0.5% to ₹92,775 per kilo.

Crude oil rose by 1.6% to ₹6,451 per barrel, and natural gas advanced by 8.2% to ₹289.3 per thermal unit.

 

India Stock Movers

Resource industry-linked stocks led the decliners in Monday's trading after the rupee dropped to a new record low. 

ONGC dropped 3.7% to ₹248.10, Reliance Industries decreased 1.6% to ₹1,244.75, and Coal India plunged 3.7% to ₹371.0.

Software and business services exporters dropped between 1% and 3% on the worries that India will be included in the new round of tariffs that are likely to be announced over the next two months. 

TCS decreased 1% to ₹4,030.45, Infosys declined 0.4% to ₹1,844.55, Wipro gained 1.2% to ₹308.80, and HCL Technologies fell 1.4% to ₹1,682.40.