After signing an executive order granting Canada and the US another temporary tariff reprieve, the US president blamed «globalist» nations and corporations for market-wide declines and shrugged off spooked markets.
ADVERTISEMENTUS President Donald Trump has spent the first couple of months of his second administration announcing, and then promptly revoking, tariffs on imports from Canada and Mexico – the country’s closest trading partners.
“A lot of them are globalist countries and companies that won’t be doing as well because we’re taking back things that have been taken from us many years ago,” Trump said during an executive order signing ceremony at the Oval Office while taking questions from the press pool.
On Thursday, he signed an order temporarily minimising the tariff burden from 25% to 10% on car parts, subassembly products and potash, a key fertiliser component, from Canada and Mexico to lessen the immediate impact on US producers and farmers who rely on them.
However, this did little to calm declining markets as both the Nasdaq and the S&P – the two most important indexes in the US indicating general market health and investor moods – registered significant drops by the end of the day.
“Wall Street endured a chaotic session yesterday with the Nasdaq down 2.6% and the S&P 500 down 1.8%. The VIX measure of volatility jumped by 13.5%, illustrating how investors are feeling nervous,” Russ Mould, investment director at AJ Bell, told Euronews.
Trump brushed off reporter questions on the decline saying he “wasn’t looking at markets” and said there would “always be a little short-term interruption, (but) I don’t think it’s going to be big.”
In his speech, he placed a particular emphasis on European nations, who he claimed were happy to allow the US to “pay their defence bills” while refusing to buy American products and that it “adds up to a bad number after a lot of years.”
“We were supporting NATO, we were paying the bills for other countries, yet those same countries, mostly European countries, were ripping us off in trade… They won’t take our cars, take our agricultural products, they wouldn’t take anything yet we were taking their cars by the millions, Mercedes, BMW and Volkswagen,” Trump continued.
Why is index volatility important?
The effects of Trump’s decisions on tariffs are not immediately reflected in the prices of groceries you buy at the store on the same day the tariffs get passed.
Yet, the indexes – via the price of a good or commodity on a stock market – react to what they expect the price or demand to be months or sometimes weeks later.
In short, they ring alarm bells for what they expect to be challenges going forward.
Market indexes are extremely sensitive, and have known to go up or down within one day based solely on speeches made by presidents or business leaders – even the ones that are not economic in nature – acting like a weather vane that indicates future economic activity. Hence why the current crisis is referred to as “market spooking”.
Tariffs, such as the ones Trump has announced against Canada and Mexico, are considered significant market interventions or actions that will lead to major shifts in production, supply and demand.
This is why the governments in Canada and Mexico, who operate under what is basically a shared economic space under the US-Mexico-Canada Agreement or USMCA – which means that a tyre can be made in the US, a machine part can be made in Canada, and the aluminium encasing can be made in Mexico, and then the whole car can be assembled in one of the three – have taken such deep offense to Trump’s actions.
“Even though Donald Trump has made more goods exempt from tariffs on Canada and Mexico, it’s the constant tinkering that’s upset investors,” explained Mould.
ADVERTISEMENTOn Wednesday, Trump spoke with representatives of the Big 3 automobile companies in the US – General Motors, Ford, and Stellantis – who asked that tariffs be temporarily lowered so they can adjust to the new circumstances.
“They said ‘could we have some help with the tariffs because of the speed’ and I said look I’m going to do it, but that’s it, don’t come back to me after 2 April,” Trump highlighted in his retelling of the meeting in the Oval Office.
Trump repeated that the full tariff regime will go into effect on 2 April.
While the initial 25% tariff on 4 March was harsher for producers than the 10% tariff signed on Thursday, markets operate on predictions — so the constant back and forth, and the uncertainty of more to come, is even more damaging to market indexes.
ADVERTISEMENT“If Trump had stuck to his guns, companies could have planned adjustments accordingly and known the lay of the land. The fact Trump keeps changing his mind confuses matters as companies have no idea what’s going on from one day to the next. That also means investors are unsure how to position their portfolios,” explained Mould.
The persistent ‘globalist’ dog-whistle
Most average consumers do not follow the daily fluctuations of market indexes, which is why the majority of Trump’s speech was focused on repeating how this was “a big game changer” because the US was being “ripped off” for years.
In fact, figures like Trump rely on the fact that US citizens who see or hear his speeches will assume that the prices of things like eggs – whose perceived high price was a common trope during the election campaign – are being controlled by shadowy figures or puppet masters whose sole intention it is to pry their hard-earned money from their hands.
Populist and far-right leaders and thinkers, some of whom belong to Trump’s closest inner circle such as Stephen Miller, the White House Deputy Chief of Staff, like to refer to these evil forces as “globalists” – a term Trump seems to have adopted himself – in order to equate business leaders and foreign countries such as those on the European continent to malevolent meddlers.
ADVERTISEMENTThe term is misleading, since the US and its allies all have free-market economies that engage in trade with other nations, making the US itself globalist by definition. The term is further rendered obsolete by the fact that the US dollar is the currency of global trade, making the country a key player in the “globalist” market.
Most worryingly, the phrase is used by the far-right as a racist dog whistle and is tied to an antisemitic conspiracy theory that Jewish people are those who perpetuate “globalist” economic activity and act against the “insular” or closed off interests of a nation.
