This report is from today’s TNC’s Daily Open, our international markets update. TNC Daily Open keeps investors informed on everything they need to know, no matter where they are.
Tariffs will not go into effect immediately, at least in Mexico and Canada. The two nations agreed to strengthen border security, which resulted in a halt in tariffs, another successful agreement brokered by US President Donald Trump.
With a sigh of relief, markets turned sharply around in response to the news. However, markets did not have a good day because of lingering concerns about long-term uncertainty. Investors’ (although unrealistic) expectations for lower interest rates may have been dampened by Trump’s remarks on Sunday that he supported the US Federal Reserve’s decision to maintain rates at their current level.
Alphabet’s earnings, scheduled to be released later today, may garner the most attention. Still, given the current Trump-dominated environment, it would be interesting to see how Ford and Toyota Motor, which release their earnings on Wednesday, discuss or avoid discussing how tariffs may impact their companies.
What To Note Today
Tariff Pause on Canada and Mexico
On Monday, Prime Minister Justin Trudeau announced via X that U.S. President Donald Trump agreed to suspend tariffs on Canadian goods for at least 30 days. Shortly before, Mexican President Claudia Sheinbaum shared that Trump would delay tariffs on Mexican exports for the same period. This move comes after both countries committed to enhancing efforts to curb fentanyl trafficking into the U.S.
China Responds with New Tariffs
China unveiled new measures in retaliation to Trump’s 10% tariffs added to existing duties. The Finance Ministry announced on Tuesday that starting February 10, China will impose an additional 15% tariff on U.S. coal and liquefied natural gas, along with a 10% hike on crude oil, agricultural equipment, and select automobiles. Meanwhile, Beijing has also launched an antitrust investigation into Google, citing monopoly concerns.
Market Movements: Asia Rises, U.S. Slips
U.S. markets closed lower on Monday despite the tariff delay. The Dow Jones Industrial Average dropped 0.28%, reversing part of its earlier losses. The S&P 500 fell 0.76%, and the Nasdaq Composite slid 1.2%. Conversely, Asia-Pacific markets saw gains on Tuesday. Japan’s Nikkei 225 rose by 0.6%, driven by strong performances from Honda and Toyota, though Mitsubishi Motors plunged 15.25% after revising its profit forecast downward.
Trump Unveils Sovereign Wealth Fund
Trump signed an executive order on Monday to establish a U.S. sovereign wealth fund for infrastructure investments, such as highways and airports. The fund could also be leveraged to extend U.S. influence in regions like Greenland and Panama and potentially acquire companies like TikTok.
Federal Reserve Holds Rates Steady
In a surprising shift, Trump supported the Federal Reserve’s decision to maintain interest rates at 4.25%-4.5% during its January meeting, calling it “the right thing to do.” This contrasts with his earlier remarks at the World Economic Forum in Davos, where he demanded immediate rate cuts.
Palantir Surges on Strong Earnings
Palantir’s stock soared 24% in after-hours trading on Monday following robust fourth-quarter results. The company reported a 36% revenue increase to $828 million year-over-year, with full-year sales up 29%. CEO Alex Karp attributed much of the growth to the company’s advancements in AI, and Palantir offered optimistic forecasts for the coming year.
Are Tariffs a Negotiation Tool?
While the temporary tariff suspension lifted market sentiment, analysts remain cautious. Tariffs may become a negotiation tactic, but the risk of retaliatory actions from other nations could fuel further market volatility.
Bottom Line
According to Goldman Sachs, Trump’s tariffs could pose significant challenges for China, potentially reducing its GDP growth by 50 basis points this year. As China grapples with economic headwinds, experts predict increased fiscal stimulus to counter deflationary pressures and bolster consumer spending amid ongoing trade tensions.
