WSJ What’s News - Markets Rattled as U.S.Tariffs Go Into Effect

Episode Date: March 4, 2025

P.M. Edition for Mar. 4. Markets closed lower as investors reckoned with President Trump’s new tariffs on Mexico and Canada and those countries’ responses. Plus, WSJ economic policy reporter Gavin Bade explains why this could be only the first or second salvo of this trade war. And White House reporter Tarini Parti tells us what to watch for in President Trump’s address to Congress later this evening. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Markets were rattled after President Trump's tariffs went into effect. Plus, Canada, Mexico, and China announced counter and retaliatory steps. This is only the first or second salvo of this trade war. We have a whole handful of tariffs coming up next month. And what to watch for when Trump addresses Congress tonight. It's Tuesday, March 4th. I'm Alex Ocilla for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. President Trump's tariffs, a 25% duty on goods from Canada and Mexico and an additional

10% tariffs on goods from China, went into effect at midnight. The president has blamed Canada and Mexico for the flow of immigrants and illicit drugs like fentanyl into the U.S. and said that tariffs are on, quote, until the crisis is alleviated. Markets were rattled by the new levies and the countermeasures by Canada, Mexico, and China. Markets fell sharply earlier in the day, with the Nasdaq even flirting with correction territory, but then recovered somewhat to end the day lower. The Dow led the losses, closing down about 1.6%. The S&P 500 dropped roughly 1.2%, and the Nasdaq ended the day about 0.4% lower.

Wall Street's fear gauge also picked up after stocks slid today. With more on the market and the Nasdaq ended the day about 0.4% lower. Wall Street's fear gauge also picked up after stocks slid today. With more on the market reaction, I'm joined now by WSJ reporter David Uberty. David, this was quite a day. What was the sentiment in the markets? It was negative to say the least.

I mean, we are only down roughly 3% on the week across the major indexes. That said, talking to investors today and yesterday is very clear that none of them like what is happening right now. There has been a weird dynamic in the market over the last, let's say, four or five months since Donald Trump's election. There has been this expectation and maybe wishful thinking that tariffs are this sort of ace negotiating tactic that Trump might

whip out to pursue new trade deals and so to speak. That has turned out to be not the case. And what we've seen this week is just that the market doesn't want that to happen. There's weakening consumer confidence, there's climbing inflation expectations, and there's falling growth expectations. That's a pretty combustible mixture. And that's why everything on your screen is in the red. There are some people within the market

that hope these tariffs could be off by tomorrow. There could be some masterstroke deal that happens between the governments of Mexico and Canada and the United States and so on. Until that happens, I think you will see this choppiness within the market. What were some of the sectors that were hit particularly hard today?

Today was financials. They led S&P 500 downward. In addition to that, you had some pretty big losses from firms, including energy. That plays into this broader macroeconomic outlook. The financial industry or the energy industry, those could be paying the price of growth slows if M&A activity stalls and if investor appetite really starts petering out.

That was WSJ reporter David Uberti. Thank you, David. Thanks. As we mentioned, Canada, Mexico, and China responded today to the U.S. tariffs. Canadian Prime Minister Justin Trudeau announced retaliatory 25% tariffs on nearly $100 billion of imported U.S. goods, such as alcohol, clothing, and household appliances, in two waves. In an address, Trudeau said that Trump was acting in bad faith and called the concerns about border security and fentanyl trafficking that Trump used to justify the new tariffs

quote, totally bogus. He said it'll be the American people who will be hit by the effect of the tariffs. I want to speak first directly to the American people. We don't want this. We want to work with you as a friend and ally. And we don't want to see you hurt either. But your government has chosen to do this to you. Meanwhile, Mexican President Claudia Scheinbaum said she plans to announce retaliatory measures on Sunday. In her daily news conference, Scheinbaum said that there was no justification for the tariffs

and pushed for cooperation. No hay motivo, razón, reason, or justification for this decision that will affect our peoples and nations. We have said it in different ways. Cooperation and coordination? Yes. Subordination, interventionism? No.

Earlier, China said that it is imposing an additional 15% tariff on U.S. chicken, wheat, corn and cotton products and an additional 10% tariff on other agricultural products, including soybeans, pork, fruit, vegetables and dairy. These would go into effect on March 10th. China's Commerce Ministry also said that it added more than two dozen American companies to export control and corporate blacklists. China added that it has also filed a lawsuit with the World Trade Organization against the U.S.'s new tariff increase. Joining me now is WSJ Economic Policy reporter Gavin Bade, who is in the Senate Press Gallery. So, Gavin, how exposed are Mexico and Canada

to these tariffs? They are quite exposed right now. I mean, the US is the biggest export market for both Mexico and Canada. So this is all battle stations right now. This is a pretty big economic shock to the entire North American economy, the US included. Has the US had any response to the other countries responding to the tariffs? Mostly just that they will continue fighting this out until fentanyl deaths come down. I mean, it's been very difficult to know what exactly Trump wants to get these tariffs lifted. I just talked to Senator Bill Haggerty here at the Senate.

One of Trump's closest allies talks to him often about trade and very often about fentanyl because he's from Tennessee, big fentanyl problem there. And he said Trump is very serious about getting these fentanyl death numbers down. And I asked him, well, does he need to see them go to zero before these tariffs are lifted or is a drop in the level of fentanyl deaths enough? And not even Haggerty knew that. If these tariffs go away, do we have any idea of what the effect might be? You would see a big sigh of relief. You would see a bump in the stock market. You know, you would see a lot of relief in supply chains and markets if he was able to

strike a deal on this. But remember, this is only the first or second salvo of this trade war. We have a whole handful of tariffs coming up next month on everything from automotive products to pharmaceutical products. And then Trump previewed some new agricultural tariffs yesterday that we have not heard any announcements about yet. So there's a lot more coming down the pike here. That was WSJ Economic Policy reporter Gavin Bade.

Thank you, Gavin. Thanks, Alex. So when will consumers feel the effects of tariffs? Not immediately, as Wall Street Journal data news editor Anthony DeBarros told our Your Money Briefing podcast. We would start to expect to see prices on certain items be affected within the next month or so. Now, that said, a lot of companies that import goods spent a lot of money during December and January and February as well to bring in product ahead of the tariffs. So that could mitigate some of the immediate price impacts that we're talking about here. To hear more about how prices may change as a result of the

tariffs, listen to tomorrow's episode of Your Money Briefing. Meanwhile, in their earnings reports, companies have already started talking about the effects of the tariffs. Electronics retailer Best Buy said today that U.S. consumers are likely to face higher prices as vendors throughout its supply chain react to the tariffs, a scenario that may crimp demand for electronics. And Target warned that its sales this year could be flat because of consumer uncertainty and tariffs. Coming up, five things to keep an eye on when President Trump speaks to Congress later this evening. That's after the break. President Trump is expected to address Congress this evening

in a State of the Union-style speech. According to a White House official, the theme of the speech is the renewal of the American Dream. WSJ White House reporter Tarini Pardee tells us what she's going to be listening for. I'm going to be listening for a few things. The first being the president's plan to end the war in Ukraine. Another thing I'll be looking out for is how the president plans to sell what billionaire Elon Musk has been doing to voters. His efforts to shrink the government, to cut government spending. So this will be an opportunity for him to really explain why this is being done, why this is needed.

We have not heard the president talk about inflation and prices as much since the campaign ended. This will be his opportunity to talk about his economic agenda, in particular the 25% tariffs on goods from Mexico and Canada that he moved ahead with today. The president has already done a lot on immigration. We'll hear a little bit more from the president on this issue in particular. We're also going to be looking at the Democratic response. We have not heard as much from Democrats in terms of a cohesive opposition campaign since the president has taken office. And this will be a chance for Democrats to push back on the president's agenda. They have selected Michigan Senator Slotkin to deliver the democratic response to Trump's

address. In other news, President Trump wanted the U.S. to retake the Panama Canal. A deal struck by BlackRock will give American investors control of ports on either end of the vital trade route, though not oversight of the canal itself. A group of investors led by BlackRock has agreed to buy majority stakes in ports on both sides of the Panama Canal for nearly $23 billion. The deal would bring the key ports under American corporate ownership. The previous owner was Hong Kong-based CK Hutchison. President Trump has said those foreign-owned ports, along with infrastructure

around the country, that China helped build through its Belt and Road Initiative violate the canal's neutrality. The last episode of our Building Influence series gets into what the US is doing to respond to Beijing's infrastructure program and the clout that comes with it. That episode will be out Sunday, but you can catch the first two episodes on what Beijing is getting out of its trillion- dollar campaign on the What's News feed now. And Ukrainian President Volodymyr Zelensky said his heated meeting with President Trump last week was quote, regrettable. On social media, he wrote that his country is ready to negotiate peace and to sign the

Mineral Rights Agreement with the U.S. Senior U.S. officials say it is unclear if Zelensky's statement will be enough to convince Trump to restart U.S. military aid to Ukraine, which the White House halted yesterday. And that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Bansi and Pierre Bienneme with supervising producer Michael Kosmitis. I'm Alex Osela for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.