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Stocks fell sharply following a refusal by President Donald Trump to rule out the possibility that the U.S. could fall into a recession due to his tariff-driven trade strategy.
“I hate to predict things like that,” the Commander in Chief said when pressed by Fox News’ Maria Bartiromo on the issue of an economic downturn Sunday evening.
“There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. And there are always periods of it takes a little time. I think it should be great for us.” The American economy is “going to have a disruption, but we’re OK with that,” the president added.
Disruption was indeed the name of the game on Wall Street on Monday; the S&P 500 tumbled 2.7 percent, the Dow Jones Industrial Average fell 2.08 percent and the Nasdaq Composite saw a steep, 4-percent decline.
Meanwhile, Goldman Sachs downgraded the country’s economic growth forecast from 2.4 percent to 1.7 percent, with chief economist Jan Hatzius writing, “Our trade policy assumptions have become considerably more adverse” in a Monday note.
The market shakeup comes days after Trump paused controversial 25-percent duties on Canada and Mexico until April 2 and stepped-up tariffs on China-made goods by 10 percent (adding to a previous 10-percent duty hike that went into effect in early February).
The on-again, off-again duties have both confounded and rankled U.S. trading partners; on Monday, China implemented new 10-percent to 15-percent duties on a variety of American agricultural exports worth about $21 billion, while Canada announced new 25-percent taxes on electricity exports to U.S. states like Michigan, New York and Minnesota.
Ontario Premier Doug Ford, whose province produces a portion of the electricity that powers 1.5 million homes in the Northern U.S., said he “will not hesitate to increase this charge” if Trump escalates the trade war with Canada. “I will not hesitate to shut the electricity off completely,” he said at a press conference Monday morning.
“Until these tariffs are off the table, until the threat of tariffs is gone for good, Ontario will not relent,” he added.
Meanwhile, Canada’s Liberal Party has elected a new prime minister who is quickly making it known that he’s unwilling to back down from Trump’s threats. Central banker and political centrist Mark Carney swept nearly 86 percent of the vote in an election on Sunday, and in his first address to the nation told Canadians that the country’s 25-percent retaliatory duties on U.S.-made goods like whiskey would remain in place until America shows Canada “respect.”
Trump has levied “unjustified tariffs on what we build on what we sell, on how we make a living,” he said in his victory speech. “He’s attacking Canadian families, workers and businesses, and we cannot let him succeed, and we won’t.”
Following Trump’s decision to move forward with duties on Canadian goods last week, outgoing Prime Minister Justin Trudeau announced immediate retaliatory duties on $30 billion-worth of American-made clothing, shoes, appliances, coffee, cosmetics, and alcohol. American fashion trade groups have called Trump’s tariffs, and the impacts of duties on American apparel and footwear, a “potentially crushing burden on American businesses.”
The first tranche of tariffs is to be followed in several weeks’ time by an even larger list of goods worth about $125 billion which includes passenger vehicles, trucks, steel and aluminum, fruits, vegetables, meat and dairy. Should Trump move forward with his plan to resume the U.S. duties on Canadian goods on April 2, U.S. exporters will face the full weight of those duties, Carney reiterated.
“America is not Canada. And Canada never, ever, will be part of America in any way, shape or form,” Carney added. “We didn’t ask for this fight, but Canadians are always ready when someone else drops the gloves.”
