Wall Street’s main indexes fell on Wednesday as U.S. President Donald Trump looked set to impose steep tariffs on imported steel and aluminum this week, a move that could spiral into a global trade war.
The markets have been choppy, with the Dow falling more than 300 points at one point during the day, following the exit of staunch free trade supporter Gary Cohn from the White House.
“There is more of a political worry that has crept back into the market,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.
“It’s not just the tariffs, but the broader White House changing … all those things are undercurrents which are affecting market sentiment in the near-term.”
Trump also stepped up pressure against China to develop a plan to reduce its trade imbalance with the United States by a billion dollars.
Markets trimmed losses after a Bloomberg interview in which White House trade adviser Peter Navarro, who favours strong tariffs, said he was not a candidate to replace Cohn as Trump’s chief economic adviser.
Cohn, the architect of a tax overhaul passed in December, was seen as a stabilizing force within the Trump administration. His departure is seen strengthening the hands of those advocating a protectionist agenda.
A steep 2.5 per cent drop in oil prices following data that showed U.S. inventories had risen also weighed.
Just before 1 p.m. ET, the Dow Jones Industrial Average was down 268.89 points, or 1.08 per cent, at 24,615.23 .
The S&P 500 fell 0.66 per cent to 2,710.15 and the Nasdaq Composite declined 0.26 per cent to 7,352.98.
In contrast, the Russell 2000 index, which tracks U.S. small-cap stocks, was up 0.27 per cent as domestically focused companies are expected to benefit from a protectionist stance.
On Bay Street, the S&P/TSX composite index was off by 0.44 per cent, dropping 68.36 points to 15,476.83.
The Canadian dollar was trading lower, off by 0.43 of a cent at 77.15 cents US after the Bank of Canada did the expected and held the a key interest rate steady.
Trade worries
Worries over the threat to global trade that U.S. moves would represent have dominated Wall Street trading for almost a week.
Spokeswoman Sarah Sanders told reporters the White House was on track to announce tariffs by the end of this week.
Wednesday’s losses were broad-based, but shares of manufacturing titans Boeing and Caterpillar were hit hard on worries about higher input costs and trade barriers outside the United States.