- The Dow Jones fell around 300 points on Thursday, buckling as tariffs weigh on key companies.
- Despite targeted declines in critical stocks, markets are generally brushing off Trump’s tariffs.
- Reciprocal tariffs, which were initially announced in early April, appear to have finally come into effect.
The Dow Jones Industrial Average (DJIA) softened on Thursday, slipping back below 44,000 as freshly minted tariffs weigh on growth prospects for key companies listed on the major blue-chip index. United States (US) President Donald Trump appears to have finally muscled his “reciprocal” tariff bundle over the finish line, with steep import taxes imposed on virtually all goods imported into the US.
The Dow Jones is headed back into bearish momentum with the index testing down 3% from record highs above 44,130 posted just last week. The Dow is set for another challenge of the 50-day Exponential Moving Average (EMA) near 43,600 after catching a technical bounce from the key moving average last Friday, with intraday flows flubbing a topside push for the 44,500 level.
Tariffs kick off, but losses remain contained in key stocks
Global markets are largely shrugging off President Trump’s package of reciprocal tariffs that went into effect Thursday morning, with the majority of market participants expecting that another deferment will be found. Despite an overall upbeat investor outlook for day one of global tariffs, risk factors from steep import taxes are piling up on Caterpillar (CAT), which fell 3% after the company warned that tariffs will continue to eat the company alive. Caterpillar’s Q2 operating profit tumbled 18% compared to the same quarter in the previous year, matching similar declines in the industrial sector, and highlighting that comparatively limited tariffs up to this point are already having large impacts in key industries.
US weekly Initial Jobless Claims ticked up to 226K, accelerating over the forecast increase to 221K. Nonfarm Productivity also rose more than expected in the second quarter, climbing 2.4% QoQ compared to the expected 1.9% upswing. Coming up on Friday, University of Michigan (UoM) Consumer Inflation Expectations will round out the week’s data docket.
Read more stock news: Apple stock continues advance after Wednesday’s $100 billion announcement
Dow Jones 5-minute chart
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Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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