US stock futures fell on Thursday, as concerns grew over US President Donald Trump’s tariff plans. Investors are closely monitoring these plans and awaiting further data on producer prices, which is expected to be released soon.
At 8:00 a.m. ET (12:00 GMT), S&P 500 futures were down about 18 points, or 0.3%, and Nasdaq 100 futures were down 101 points, or 0.5%. Dow Jones futures were down about 96 points, or 0.2%.
Market performance was mixed at the close of trading on Wednesday, with the S&P 500 and the tech-dominated Nasdaq 100 rising, driven by a significant rise in technology stocks. In contrast, the Dow Jones Industrial Average closed lower after a volatile session. Investors are awaiting the monthly producer price report, which may provide clues about US inflation and influence future monetary policy decisions.
Economic Outlook for Producer Prices:
Economists expect the US Department of Labor’s Producer Price Index for final demand to fall to 3.3% during the 12 months ending in February, compared to 3.5% the previous month. Monthly growth is also expected to slow to 0.3%, compared to 0.4% the previous month. This data will be important in determining the path of inflation and price levels in the US economy.
Implications of Inflation Data for Monetary Policy:
Separate data released Wednesday showed that the consumer price index rose at a slower-than-expected pace last month, which could be positive news for President Trump, who continues to seek to adjust trade relations with various countries. This slowdown in inflation may contribute to hopes that the Federal Reserve may cut interest rates later this year. These expectations could impact financial markets and move them toward more investments in assets that could benefit from accommodative monetary policy.
US Tariffs and Their Economic Impact
Elsewhere, trade tensions are set to escalate on Thursday as US Commerce Secretary Howard Lutnick and US Trade Representative Jamison Greer meet to discuss renewing the US-Mexico-Canada Agreement, which President Trump signed during his first term. These negotiations come at a sensitive time following the US decision to impose expanded 25% tariffs on steel and aluminum from Canada.
The US is seeking to put pressure on Canada through the tariffs, which has angered the Canadian Prime Minister, who had previously announced plans to impose an additional 25% tariff on electricity exported from Ontario to the United States. After US officials intervened, Trump threatened to double the tariffs on Canadian steel and aluminum to 50%, prompting a temporary suspension of the tax.
Oil Price Volatility and Global Demand
Oil prices witnessed significant volatility in global markets as traders assessed the impact of the economic uncertainty resulting from the tariffs on global oil demand. The release of US gasoline inventories also significantly impacted oil price movements. By 6:46 AM ET, Brent crude futures were down 0.4% at $70.65 a barrel, while West Texas Intermediate (WTI) crude futures were up 0.5% at $67.33 a barrel. In the previous session, futures rose 2% after US government data showed larger-than-expected draws in oil and fuel inventories. Specifically, US gasoline inventories fell by 5.7 million barrels, exceeding expectations for a 1.9 million-barrel draw.
Gold Price Outlook:
In European trading, gold prices rose on growing bets on a potential interest rate cut by the Federal Reserve this year. This support comes from weak US inflation data, which increases gold’s appeal as a safe haven.
The Impact of Trade Tensions on Equity Markets
Trade tensions are a major economic factor that significantly impacts global stock markets. In recent years, these tensions, particularly between the United States and key trading partners such as China, Canada, and Mexico, have gained widespread attention. These tensions significantly impact investor sentiment and market movements, leading to price volatility and increased uncertainty in financial markets.
The Impact of Tariffs on Stocks:
Tariffs are one of the most prominent trade pressure tools used by countries against each other. When a country imposes tariffs on imports from another country, this increases the cost of imported goods, potentially leading to higher prices in the domestic market. Companies that rely on imports may experience increased production costs, negatively impacting their profits.
For example, US President Donald Trump imposed tariffs on a range of Chinese goods, increasing the cost of many products imported from China. This has had a negative impact on US companies that rely on these goods, especially technology companies such as Apple and Microsoft, which rely on imported components from China. As a result, US stock markets experienced sharp volatility during that period.
The Impact of Trade Tensions on Investor Sentiment:
Trade tensions contribute to increased economic uncertainty, leading to a decline in confidence in the markets. Investors are often reluctant to make major investment decisions in a risky environment, leading to increased selling in stock markets. For example, when news of new tariffs or economic sanctions breaks, investors often decide to reduce their exposure to riskier markets, such as stocks, in favor of safer assets such as gold or government bonds.
Impact on Different Sectors
Trade tensions affect different market sectors unevenly. For example, companies operating in the energy or basic materials sector may benefit from trade tensions if there is an increase in demand for certain commodities such as oil or metals due to reduced supply from countries involved in the trade dispute. Conversely, the technology sector can suffer from trade tensions if companies rely on global supply chains, as is the case with large technology companies that use components from different countries.
Trade Tensions and Economic Growth
When trade tensions occur, many analysts predict that they will slow down economic growth, especially if the conflicts persist. A slowdown in economic growth, in turn, causes a decline in corporate profits, which impacts the performance of stock markets. For example, if tariffs on Chinese products increase, American companies in sectors such as automobiles and clothing will face challenges, leading to a drop in their stock prices.
The Impact of Trade Tensions on Global Markets:
Trade tensions affect more than just US markets; they extend to global stock markets. For example, when the US imposes tariffs on Chinese exports, demand for Chinese goods may decline, negatively affecting Chinese companies listed on stock markets such as Hong Kong and Shanghai. European markets may also experience a decline in stock prices, especially if European companies rely on exports to the United States or China.
Trade Tensions and Government Policies:
Governments sometimes seek to ease trade tensions by negotiating new trade agreements or reducing tariffs. When new trade agreements or news of a trade settlement are announced, they often trigger a rebound in the markets. For example, the United States-Mexico-Canada Agreement (USMCA) reached a significant milestone.
