Trump tariffs rattle Wall Street — here's what the movers and shakers are talking about

Trump tariffs rattle Wall Street — here's what the movers and shakers are talking about

Trump’s Tariffs Shock Wall Street, Trigger Market Jitters and Economic Concerns

The Trump administration’s unexpected decision to impose steep tariffs on Canada, Mexico, and China has sent shockwaves through Wall Street, disrupting expectations of a strong economic year in 2025. The move threatens major market gains, particularly in high-flying AI stocks like Nvidia (NVDA) and Microsoft (MSFT), which had been fueling investor optimism.

Tariffs Take Effect, Markets React

On Saturday, President Donald Trump announced new 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese goods, citing concerns over fentanyl and illegal immigration. These tariffs are set to take effect on February 4.

Trump acknowledged potential economic pain but defended the decision, stating on Truth Social, “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

Markets responded swiftly, with Dow Jones Industrial Average futures plunging over 500 points on Monday, as economists and analysts braced for economic fallout.

Economic and Market Projections

Morgan Stanley: A Hit to Growth and Inflation

Morgan Stanley’s public policy research team warned of significant economic repercussions if the tariffs remain in place:

• US Inflation could rise 0.3% to 0.6% in the next few months, pushing headline personal consumption expenditures (PCE) inflation to 2.9%-3.2%.
• US GDP growth could slow by 0.7% to 1.1%, bringing real GDP growth down to 1.2%-1.6% over the next year.
• A recession in Mexico is now the base case scenario due to economic strain.
• Market Impact: Strengthening of the US dollar against the Mexican peso and Canadian dollar, potential downward pressure on US equities, and increased demand for longer-duration US Treasury bonds as investors seek safer assets.

Evercore ISI: Declining US Exports and Economic Drag

Economists at Evercore ISI echoed concerns over growth, predicting:

• A 40 basis point increase in inflation.
• A 40 basis point drag on economic growth in the latter half of 2025.
• A potential $1 trillion increase in federal receipts over the next decade, as tariff revenues pour into government coffers.

China’s Reaction: Tariffs Disrupt Lunar New Year

According to Evercore ISI China strategist Neo Wang, the timing of Trump’s tariff announcement could further strain US-China relations:

• The announcement coincided with Chinese New Year celebrations, an important time of economic and cultural significance.
• In China, the news broke on February 2, coinciding with the traditional 5th day of the Lunar New Year, when people honor the God of Wealth—a particularly inauspicious moment for a financial shock.
• Analysts believe the tariff move may be aimed at pressuring Beijing into negotiations over TikTok or forcing China to the bargaining table on broader trade issues.

Uncertain Path Forward

As markets reel from the unexpected tariffs, investors, policymakers, and economists are assessing the long-term implications. While the Trump administration frames the move as a necessary economic shift, the immediate impact suggests a volatile year ahead for global trade, inflation, and stock markets.