The Dow Jones Industrial Average experienced a decline of approximately 450 points, or 1.1%, amid rising trade tensions with Canada. President Trump announced plans for an additional 25% tariff on Canadian steel and aluminium, bringing the total to 50%.
This news caused the index to hit an intraday low around 41,175 before closing near 41,500. Job openings in the US rose to 7.74 million in January, above expectations, providing some stability in the volatile market.
Stock Market Performance
Most stocks on the Dow were in negative territory, with notable declines from companies like Verizon, Disney, and Apple. Conversely, Salesforce and Nvidia reported gains.
The Dow is now down 8.4% from record highs reached in November, facing bearish momentum while technical indicators suggest a potential correction. Tariffs serve as protectionist measures aimed at supporting domestic industries but are debated among economists regarding their long-term effects.
As the 2024 presidential election approaches, Trump aims to use tariffs to bolster the US economy, focusing particularly on Mexico, China, and Canada, which represented 42% of total US imports in 2024.
The Dow’s sharp drop follows fresh concerns over tariffs, particularly on steel and aluminium imported from Canada. We saw a volatile session where the index briefly fell to an intraday low before rebounding slightly by the close. The market’s reaction reflects broader unease about how trade policies could affect corporate earnings and economic growth.
Although job openings in the US came in above forecasts, providing some reassurance, it wasn’t enough to offset the weight of trade-related uncertainty. With available positions approaching 7.74 million in January, companies still appear willing to hire despite concerns over supply chain disruptions and rising material costs. Yet, we know that high job openings alone do not guarantee stability if companies begin to anticipate higher input expenses or consumer sentiment weakens.
Market breadth tilted negative, with many heavyweight stocks posting losses. Corporations under pressure included Verizon, Disney, and Apple, which traded lower as investors re-evaluated risk. However, some companies held firm, with Salesforce and Nvidia seeing upward moves. The strength in these few names failed to shift overall sentiment, though their gains highlight where traders are still finding value or growth potential.
At this point, the Dow has pulled back 8.4% from its peak in November. With prices still under pressure, momentum is favouring further declines. Technical indicators suggest traders are watching for a correction, with previous support levels now in focus.
Trade Policy Impact
Washington’s stance on tariffs suggests trade remains a central theme, especially with the election drawing nearer. The emphasis on import duties against major trading partners shows a targeted strategy, with Canada now facing harsher penalties. Together, Mexico, China, and Canada accounted for over 40% of goods entering the US this year, so any escalation in tariffs could have broader-reaching implications.
For those trading derivatives, the next few weeks will require close attention to not just movements in equities but also shifting expectations around trade policy and economic data. Volatility is persisting, and as tariffs remain a core issue, price swings are unlikely to subside.
