The S&P 500 entered correction territory on Thursday due to the volatility caused by ongoing trade wars initiated by the US administration. The index closed more than 10% below its peak on February 19, marking the second week of pressure on Wall Street. Similarly, the technology-focused Nasdaq Composite also closed in correction territory last Thursday, while the Dow remains over 9% down from its December peak.
Tensions escalated when Canadian and EU leaders retaliated against American tariffs on steel and aluminum imports. In response, US President Donald Trump threatened a 200% tariff on European alcohol imports, following the EU’s imposition of a 50% tariff on American bourbon. Trump remarked on Truth Social, “This will be great for the Wine and Champagne businesses in the US.”
This exchange followed the US administration’s decision to impose a 25% tariff on all steel and aluminum imports, prompting Canada and the EU to retaliate with tariffs on over $40 billion worth of American goods. Canadian and European leaders have vowed not to back down, despite Trump’s threats of further tariffs. Laurent Saint-Martin, France’s foreign trade minister, stated, “Donald Trump is escalating the trade war he chose to unleash.”
However, the US administration has shown flexibility in some cases. For instance, Trump reversed plans to double tariffs on steel and aluminum imports from Canada after Ontario’s premier dropped plans to place tariffs on electricity exports to the US. Additionally, Trump delayed 25% tariffs on Mexican and Canadian imports until April.
Despite these measures, US Treasury Secretary Scott Bessent expressed confidence in long-term market gains, dismissing short-term volatility concerns. The US stock market briefly recovered on Wednesday following a favorable inflation report but dropped again after Canada and the EU imposed tariffs on American exports.
Amid uncertainty, the US Federal Reserve is expected to maintain steady interest rates at its upcoming meeting, unlikely to improve Wall Street sentiment.
— news from The Guardian