North American stocks rise, then drop again after another day of tariff uncertainty
S&P 500, Dow Jones Industrial Average and Nasdaq all rose early before diving to end the day
U.S. stocks dropped Tuesday after a second day of stunning reversals brought on by tariff unease.
The S&P 500 fell 1.6 per cent Tuesday after wiping out an early gain of 4.1 per cent, which had it on track for its best day in years. That brought the index nearly 19 per cent below its record set in February.
The Dow Jones Industrial Average dropped 320 points, or 0.8 per cent, after giving up an earlier surge of 1,460, while the Nasdaq composite lost 2.1 per cent.
The S&P/TSX composite index was also down more than 1.5 per cent as markets closed.
After stocks tumbled at their fastest pace since the pandemic in the last three days, investors showed some signs of hope early in the day that U.S. President Donald Trump would soften his stance or postpone an April 9 deadline for tariffs.
But White House press secretary Karoline Leavitt said on Tuesday afternoon that Trump expects tariffs will go into effect while nearly 70 countries have reached out looking to begin negotiations to reduce the impact of U.S. trade policies.
The latest set of tariffs, including a cumulative 104 per cent levy on Chinese imports, are scheduled to kick in after midnight ET.
Market participants "were optimistic this morning that we would get some sort of sign that we're moving closer to a deal
or a compromise with some of these bigger countries or that there would be a delay coming given that so many people wanted to negotiate," said Lindsey Bell, chief market strategist at Clearnomics in New York.
"That doesn't seem to necessarily be the case as we are quickly approaching the midnight deadline and investors are losing confidence."
In the bond market, Treasury yields mostly rose for a second straight day to recover more of their sharp losses from prior months. The yield on the 10-year Treasury rose to 4.23 per cent from 4.15 per cent late Monday and from just 4.01 per cent late Friday.
Companies with vast supply chains around the world helped lead the losses. Ralph Lauren sank 6.8 per cent, for example. It sourced about 15 per cent of its products from China last fiscal year.
Best Buy's stocks fell 9.4 per cent. Best Buy doesn't import many products directly from China, but the electronics industry in general depends heavily on the country, and the company estimates vendor imports from China make up about 55 per cent of the products it purchases.
World markets get some reprieve
While fragility remains, world markets saw some reprieve on Tuesday after three days of heavy selling.
In Europe, shares rose from 14-month lows, with Paris seeing a 2.5 per cent gain.
The European Commission — set to face 20 per cent tariffs from the U.S. as of Wednesday — said Monday it had offered a "zero-for-zero" tariff deal to avert a trade war with the United States. The commission proposed counter-tariffs of 25 per cent on a range of U.S. goods, including soybeans, nuts and sausages, although other potential items like bourbon whisky were left off the list, a document seen by Reuters showed.
Japan's blue-chip Nikkei stock index closed six per cent higher, with U.S. Treasury Secretary Scott Bessent tasked with leading trade negotiations with Tokyo, viewed as a positive sign.
Thai stocks dropped nearly five per cent in catch-up selling from a holiday on Monday, while Indonesia returned from a week-long holiday to eight per cent losses.
"Sentiment is rebounding, perhaps on the view that Trump may focus protectionism on China and speed up trade deals elsewhere," said Francesco Pesole, currency strategist at ING. "Markets may be erring on the optimistic side though."
'Battle of wills' shaping up: analyst
China's markets rose only modestly after the country's sovereign wealth funds stepped in to buy shares. Chip-export-dependent Taiwan's benchmark tumbled five per cent, a day after suffering its worst fall on record.
The Chinese yuan fell to 7.3677 per dollar in the offshore market, the weakest in two months, before rebounding to be slightly stronger than Monday's close at 7.3393.
Trump dug in his heels over China, vowing additional 50 per cent levies if Beijing does not withdraw the retaliatory tariffs of 34 per cent it announced last week for the U.S. If Trump sticks to his plan, total new U.S. duties on Chinese goods will rise to 104 per cent as of midnight.
Trump imposed less expansive tariffs on China in his first term as president, some of which successor Joe Biden maintained.
But with global supply chains in jeopardy, Beijing is under pressure to respond.
"The U.S. side's threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side's blackmailing nature," China's Commerce Ministry said in a statement. "If the United States insists on having its way, China will fight to the end."
Trump's affinity for tariffs risks derailing China's largely export-led economic recovery given that no other country comes close to the consumption power of the U.S., where Chinese producers sell more than $400 billion US worth of goods annually.
"If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics," said Xu Tianchen, senior economist for China at the Economist Intelligence Unit.
Trump's tariffs will be felt particularly keenly as they target the two main strategies Chinese exporters have used to blunt the impact of the trade war: shifting some production abroad and boosting sales to non-U.S. markets.
Chinese President Xi Jinping this month is scheduled to visit Malaysia, Vietnam and Cambodia, three economies that gained from relocation by Chinese manufacturers to avoid U.S. sanctions during Trump's first term but which now face steep levies of their own.
Trump has remained defiant that tariffs are needed as "medicine" to alleviate American trade deficits — something most economists don't believe is an indicator on its own of economic health.
There have been some signs of disquiet expressed by a small number of Republican lawmakers on Capitol Hill, as well as influential Wall Street figures Bill Ackman and Jamie Dimon, and Trump's own billionaire adviser Elon Musk.
With files from The Associated Press