NEW YORK — On Wednesday, the U.S. stock market began to recover as the government made slight adjustments to certain tariffs affecting key international trading partners.
The improvement followed a notable decline the previous day, which erased gains generated post the presidential election in November. The S&P 500 climbed 0.5% in afternoon trade after a recent 6% loss, returning to pre-election levels. The Dow Jones Industrial Average gained 228 points, or 0.5%, by 1:48 p.m. Eastern, while the Nasdaq composite increased by 0.7%.
The current administration has decided to grant a temporary one-month exemption from new tariffs on imports from Mexico and Canada for U.S. automakers due to rising concerns that a trade conflict might negatively impact U.S. manufacturers. On Tuesday, the comprehensive tariffs encouraged retaliatory measures from the country’s significant trading partners, heightening the threat of a trade war likely to impair all involved economies.
Experts warn that such tariffs could elevate household costs in the U.S., disrupt global trade, and potentially stifle economic progress, creating a risk of “stagflation.” This rare phenomenon combines stagnant growth and elevated inflation, leaving Federal Reserve policymakers with limited corrective tools.
The increasing unease surrounding stagflation has caused recent sharp declines in U.S. stocks, thereby eliminating gains that had built up after Election Day. These gains arose from expectations that the new administration would ease business regulations, reduce taxes, and take other steps to enhance corporate profits and the wider economy.
During a congressional address Tuesday night, the president indicated the continuation of tariff plans, with more scheduled to be enacted on April 2, even should they provoke “a disturbance.”
“Tariffs are about making America rich again and making America great again,” he emphasized. “There will be a little disturbance, but we’re OK with that.”
Despite this, U.S. businesses and consumers are expressing unease. Consumers anticipate higher inflation due to potential tariffs, leading to a drop in confidence. Meanwhile, businesses are struggling to adapt to the rapid policy changes from Washington, with manufacturers reporting a slowing growth amid tariff concerns.
Two reports on Wednesday painted a mixed picture of the U.S. economy’s health. One indicated a significant slowdown in hiring last month, with fewer job additions than anticipated, according to ADP. This could foreshadow results from the more comprehensive jobs report due Friday from the U.S. Labor Department.
Conversely, another report showed stronger-than-expected growth in finance, real estate, and other service sectors. Despite businesses citing “chaos” and uncertainty due to tariffs, growth actually accelerated last month, based on data from the Institute for Supply Management.
“The economic impact and consumer impact is still ahead of us,” noted Sameer Samana, chief of global equities and real assets at Wells Fargo Investment Institute. “It comes back to what no one really knows, and that is how long these tariffs stay in place.”
In the bond market, Treasury yields increased, with the yield on the 10-year Treasury rising to 4.27% from 4.18% after the service sector report. This helped regain some losses since January, when concerns about economic growth had depressed yields.
The Federal Reserve’s Beige Book, releasing later that afternoon, could provide further insights by detailing business anecdotes nationwide regarding local conditions.
The U.S. economy ended the previous year robustly. Should a significant downturn occur, the Fed might lower interest rates to facilitate borrowing and stimulate the economy, although this often drives inflation higher. Concurrently, rising prices for essentials like eggs, due to tariffs, could constrain the Fed’s actions.
Positive speculation surrounding potential tariff adjustments on autos from Mexico and Canada bolstered automaker stocks; Ford surged 4.4% and General Motors increased by 5.6%.
Brown-Forman saw a 9.6% rise after revealing stronger-than-expected profits for the latest quarter. Additionally, CEO Lawson Whiting stated that the company is maintaining its sales forecasts despite potential uncertainties from the tariff environment.
Nevertheless, U.S. whiskeys could face retaliatory duties or reduced demand internationally due to the current situation.
The downtrend in Wall Street included Campbell’s, which slipped 2.4% after downwardly revising financial forecasts due to discouraging trends in its snack segment.
Internationally, stock benchmarks rose across Asia and Europe. Hong Kong’s index advanced 2.8%, South Korea’s rose 1.2%, and France’s increased 1.6%. Germany’s stocks rallied 3.4% as potential coalition partners discussed easing debt constraints to boost defense spending, an issue gaining momentum amid wavering U.S. support for European allies.
Despite America’s inward-focused policies, overseas markets have been outperforming the S&P 500.
