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Trade war fears: Stocks drop sharply again

President Trump says trade wars are good. Wall Street disagrees.The Dow fell as much as 391 points on Friday a...

Posted: Mar 2, 2018 2:58 PM
Updated: Mar 2, 2018 2:58 PM

President Trump says trade wars are good. Wall Street disagrees.

The Dow fell as much as 391 points on Friday after losing 420 points on Thursday. It recovered some of those losses and was down about 200 points at midday. The Nasdaq and the S&P 500 both sank 1% before recovering most of their losses.

The sell-off began after Trump announced that his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. Trump has not said whether some countries would be excluded from the tariffs.

For the market, "this really could be something new and worse than we have seen so far," said Brad McMillan, chief investment officer at Commonwealth Financial Network.

Trump's announcement caught investors off guard and raised fears about a tit-for-tat retaliation from China and other major US trading partners.

Top American partners, including Canada, Germany, the European Union and Australia, all denounced the move. The World Trade Organization is "clearly concerned," director general Roberto Azevedo said. "The potential for escalation is real."

On Friday, Trump elevated concerns about a full-blown trade fight even further by tweeting that "trade wars are good, and easy to win." That helped bring down stocks for the second day in a row.

"Markets hate uncertainty and we still don't know exactly who and by how much these tariffs will impact trade," said Ryan Detrick, chief senior market strategist at LPL Financial.

Related: Germany and other allies are really, really angry about Trump's tariffs

Corporate America has warned that tariffs will harm the economy and the market.

Costs could soar for American companies that rely on aluminum and steel produced overseas, such as auto and plane manufacturers and construction. Imports make up about a third of the steel American businesses use every year, and more than 90% of aluminum used here.

If the tariffs bring more expensive steel and aluminum, companies that rely on those materials may pass some of those costs to consumers. That raises the possibility inflation will creep up.

And if other countries decide to hit back with their own tariffs on US goods, export-dependent industries such as agriculture will become less competitive overseas.

Related: 'Trade wars are good?' Two words: Great. Depression.

Fears about inflation and rising bond yields caused a surge in volatility last month, including two 1,000-point plunges, as the Dow suffered its biggest losses in two years.

On the other hand, McMillan said, if corporations decide to eat most of those higher costs, their profit will take a hit, hurting their stock prices.

Shares of Boeing dropped 3% on Friday. General Motors and Ford slipped. And Caterpillar lost 2%.

The tariffs caused yields on U.S. bonds to fall on Thursday as investors sought a haven from volatile stocks. Yields and prices move in opposite directions. The 10-year Treasury was back up slightly Friday, to 2.83%.

Domestic steel and aluminum manufactures are the winners from Trump's tariff announcement.

U.S. Steel and AK Steel soared 6% and 10%, respectively, on Thursday. Century Aluminum spiked 7% Thursday.

All three gave back some of those gains on Friday. McMillan attributed their losses to investors not reading too much into Trump's tweets.

"This has the potential to get worse, but there's a long way to go before we have a trade war," he said. "What Trump says and what he does are often two different things."

Welles Orr, a former assistant US Trade Representative under President George H.W. Bush and a trade consultant, said the steel and aluminum industries are not immune to global backlash.

"This might look and make you feel good at the outset," Orr said. "But in the long run, it's going to hit so many industries."

The tariffs also raise doubts about the future of NAFTA, Orr added. Trump has threatened to tear up the trade agreement with Canada and Mexico. The three countries are in their seventh round of talks.

-CNN's Matt Egan contributed to this report.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 1560117

Reported Deaths: 20796
CountyCasesDeaths
Marion2118112563
Lake1021301523
Allen964791027
Hamilton75541551
St. Joseph66476761
Elkhart51045634
Vanderburgh50511531
Tippecanoe45721338
Johnson39600527
Hendricks37933463
Porter35132476
Madison30330547
Clark27296331
Vigo26401347
Monroe24100249
LaPorte23921313
Howard23237381
Delaware22453370
Hancock19314220
Bartholomew18980216
Kosciusko18400204
Warrick17733216
Wayne16982303
Floyd16686257
Grant15966300
Morgan15091232
Boone13924138
Dearborn12235113
Shelby12225152
Noble12170142
Henry12027202
Dubois11696152
Marshall11625171
Jackson11111104
Cass10578143
Lawrence10529221
Huntington10523140
DeKalb10482132
Gibson10114127
Montgomery9671144
Harrison9471117
Knox9415125
Whitley902571
Steuben8934105
Putnam8542100
Miami8533135
Clinton849397
Jasper8462116
Jefferson8319127
Wabash8027140
Ripley7504117
Scott685787
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Daviess6825130
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Clay628975
Decatur6261121
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Wells6090121
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Washington528071
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Pulaski281775
Brown239856
Newton239761
Benton228921
Crawford224932
Switzerland207914
Martin196722
Warren183922
Union178119
Ohio129216
Unassigned0763

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 2515949

Reported Deaths: 31987
CountyCasesDeaths
Franklin2719422100
Cuyahoga2606673087
Hamilton1758091756
Montgomery1177451651
Summit1089011418
Lucas935321193
Butler83907963
Stark771001431
Lorain64214809
Warren53428489
Mahoning51224930
Lake47591611
Clermont46928452
Delaware41107220
Trumbull39746790
Licking38790416
Medina38646427
Fairfield35828349
Greene34313435
Portage32429366
Clark32361453
Richland29653444
Wood29379301
Allen25875403
Miami24243408
Muskingum23564255
Columbiana23046409
Wayne22093365
Tuscarawas19637428
Marion18616235
Erie18608224
Ashtabula18569362
Scioto18159214
Ross17594260
Pickaway16419181
Hancock16115232
Geauga15511229
Lawrence15094186
Belmont14236248
Union1419584
Huron13908184
Jefferson13656261
Sandusky13268200
Athens12877107
Knox12160201
Seneca12055204
Darke11440202
Ashland11248184
Washington11152172
Auglaize10873147
Crawford10432178
Shelby10402160
Brown10094145
Highland9746151
Fulton9726154
Guernsey9683122
Defiance9567137
Logan9470147
Clinton9428132
Mercer9099112
Madison9032111
Preble8524170
Williams8305138
Putnam8069136
Champaign8040113
Ottawa7971123
Jackson7848121
Perry7514102
Coshocton7411136
Morrow729184
Fayette715992
Pike666689
Hardin6564133
Gallia638891
Adams6227127
Van Wert6065121
Henry602596
Hocking5918105
Wyandot503594
Carroll5009101
Holmes4880167
Paulding426465
Meigs400974
Monroe316468
Harrison299162
Noble296952
Morgan292748
Vinton258646
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