US Stocks Gain on Tariff “Breaks”

The US stock markets rose on Monday, 24 March, after President Donald Trump said he would “give a lot of countries breaks” on reciprocal tariffs and exclude industry-specific levies that he was planning to activate on 2 April. 

The Nasdaq (NQ) soared by 2.3%, Dow Jones (YM) rose by 1.4%, and the S&P500 (ES) increased by 1.8%%, with the former crossing back above the 200-day moving average after losing it on 7th March.

Trump also announced tariffs on countries that buy Venezuelan oil on Monday, boosting the prices of WTI (CL) and Brent (EB) oil in the aftermath.

The retreat from initially planned broad tariffs offered markets relief, but still, a staggering 15% of targeted countries maintain a trade surplus with the US. 

All eyes now turn to the 2nd of April to see the extent of the exemptions and reductions Trump will eventually seek.

Markets React to Possible Tariff Adjustments

According to several news sources, US reciprocal tariffs due to commence on 2nd April will be more narrow and targeted than previously announced. Trump had ordered agencies in February to evaluate the rate of reciprocal tariffs that could be imposed on all US trading partners. Officials found that around 15% of trading partners, including China, the EU, Mexico, Canada, and others, held substantial surpluses with the US. 

Despite the narrower focus and relief from the potential forgoing of tariffs on automotives and pharma on 2nd April, these countries combined trade with the US amounts to a “huge amount of [...] trading volume”, according to Secretary of Treasury Scott Bessent. Tariffs on China, Europe, Canada, and Mexico have already begun in some form or another, with further, albeit narrower, levies being a major escalation against prominent partners. Previous tariffs on these countries have provoked countermeasures, which are expected to be the case if new tariffs go into effect. 

Some Stocks Rise from Sector-Specific Changes

While the news received a positive reaction initially, particularly in light of tariffs on lumber and semiconductors starting “down the road” and not immediately, uncertainty remains high. As time runs out, any new announcements may cause volatility.

On the one hand, semi-related stocks like Micron (MU), Intel (INTC), Broadcom (AVGO), and AMD (AMD) rose on Monday. Similarly, Stellantis (STLA), Ford (F), and General Motors (GM) also saw a relief rally. However, this uncertainty kept gains contained.

Magnificent Seven stocks, including Microsoft (MSFT), Apple (AAPL), Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Meta (META) and Tesla (TSLA), also saw notable gains. Tesla, in particular, surged over 10% during Monday’s session. However, the stock had booked a series of nine weeks of declines amid political controversies facing CEO Elon Musk and brand damage.

Meanwhile, other stocks likely to lose from an ongoing trade war, such as Europe’s BMW (BMW.DE) and Volkswagen (VOW.DE), could be impacted by reduced trade with the US. Chevron (CVX), on the other hand, was up only a little despite oil prices rising from the announcement of tariffs on Venezuela as it is expected to stop operating in the country.

Trump Threatens New Tariffs on Venezuelan Oil

Monday was a heavy day on the announcements front. Trump also revealed on Truth Social (DJT) that he would impose a 25% “Secondary” levy on Venezuela. He announced this citing the country’s inability to prevent thousands of criminals from entering the US while revealing equal tariffs on countries that buy oil from Venezuela. 

The announcement also comes after Shell said it would begin producing natural gas in Venezuela. Notably, Trump announced an extension to 27 May for the winding down of Chevron’s operations in Venezuela from 4 March, originally planned to expire 30 days after 4 March. Countries that buy Venezuelan oil are also targeted by the tariff, with China being the largest importer and Spain and Italy being large consumers.

China was quick to respond on Tuesday, calling the move interference in internal affairs and urging the US to follow peaceful procedures and support developing countries. China reciprocated Trump’s January tariffs in February by imposing levies on US energy imports to China, with oil seeing a 10% duty.

Looking Beyond 2 April Tariff Day

The threats of duties from other countries triggered different reactions from US partners. The EU’s trade chief, Maros Sefcovic, is already en route to the US to negotiate. However, the country is in what Bessent calls the “dirty 15” countries that have substantial trade imbalances with the US. Despite the relief rally stemming from narrower tariffs as we head towards the “Liberation Day” of 2 April, countries in this list are likely to face new levies.

As concerns grew that an ongoing trade war would impact economic growth negatively, inflationary pressure could weigh on market sentiment. Even Federal Reserve Chair Jerome Powell acknowledged last week following the FOMC that tariffs partially add to inflation increases. Notably, the Fed raised its forecast for inflation by the end of the year and lowered its growth projection, noting a GDP of 1.7% instead of 2.1% previously. Trump’s trade policies have led to a higher probability of recession as well, with JPMorgan (JPM) raising the odds to 40%. (Source: Morningstar)

Conclusion

The markets seem to have welcomed the prospect of narrower tariffs and industry-specific exemptions, but uncertainty looms as the 2nd April tariff deadline approaches. 

Major partner economies still brace for potential escalation as the broader implications of Trump’s trade policies remain a cause for economic concern. 

With inflationary pressures rising and recession risks increasing, all eyes are on Trump’s next moves and their potential impact on global economies.

As always, previous performance does not guarantee future results, and market participants may still be surprised by developments.