On Wednesday, the US Bureau of Labor Statistics released its February inflation report, showing that consumer prices rose less than expected. As a result of this news, major Wall Street indices initially rose in the morning, but later, Canada announced retaliatory tariffs on American goods, causing the Dow Jones and S&P 500 to give back their early gains.
Due to the escalating trade tensions between the US and its major trading partners, investors continue to feel uneasy. The Dow Jones Industrial Average dropped over 300 points, erasing its earlier gains. The S&P 500 fell by 0.3%, while the Nasdaq Composite Index rose by 0.3%.
President Trump’s steel and aluminum tariffs went into effect on Wednesday. Canada announced that starting Thursday, it would impose a 25% tariff on $29.8 billion Canadian dollars (equivalent to $20.8 billion US dollars) worth of imported American goods. The EU also swiftly responded to the steel and aluminum tariffs by announcing retaliatory tariffs on American imports worth €26 billion (approximately $28.33 billion US dollars) starting in April.
Concerns among investors about the escalation of trade tensions potentially triggering a US economic downturn have been weighing on major Wall Street indices.
Just this week, the Dow, S&P 500, and Nasdaq indices have all fallen by more than 3%. On Tuesday, the S&P 500 briefly entered correction territory, dropping 10% from its February high. Over the past month, the S&P 500 has declined by nearly 8%, with the Dow Jones down by 6.6% and the Nasdaq down by 11.3%.
However, the US inflation report released early Wednesday temporarily boosted the stock market, alleviating investors’ concerns about economic slowdown. The report indicated that the inflation gauge, the Consumer Price Index (CPI), rose by 0.2% on a monthly basis and by 2.8% year-on-year, both below the Dow Jones predictions of 0.3% and 2.9%, respectively.
According to Reuters, Peter Cardillo, Chief Market Economist at Spartan Capital Securities, commented, “This (CPI) is good news on the inflation front, but clearly, with the tariffs being imposed, we still don’t know where inflation is heading at this time.”