U.S. President Donald Trump has intensified the so-called "tariff war" by imposing a 35% high tariff on Canada and warning of further additional tariffs. President Trump sent letters to over 20 countries indicating that unless an agreement is reached by Aug. 1, he will impose new tariffs.
On the 11th (Eastern Daylight Time), the Dow Jones Industrial Average closed down 279.81 points (0.63%) at 40,437.1 on the New York Stock Exchange (NYSE). The Standard & Poor’s 500 index fell 20.17 points (0.33%) to close at 6,259.75, while the Nasdaq composite index finished down 45.14 points (0.22%) at 20,585.53.
The drop in major stock indices is attributed to investor sentiment being dampened by President Trump's re-initiation of the tariff war. On the 7th, President Trump started by sending a trade letter stating he would impose 25% reciprocal tariffs on South Korea and Japan, followed by a warning of a 35% reciprocal tariff on Canada the next day.
According to NBC, President Trump revealed in an interview that he is planning 15-20% comprehensive tariffs on the remaining countries to which he has not yet sent tariff letters. This is higher than the current basic tariff of 10%.
Additionally, President Trump indicated that there would soon be trade-related announcements regarding the European Union (EU). It remains unspecified whether he will send tariff letters or announce the progress of trade agreements.
Previously, President Trump imposed a 25% tariff on Canada and Mexico, citing issues related to fentanyl and illegal immigration. Currently, tariffs are waived under the United States-Mexico-Canada Agreement (USMCA).
However, Canada has been warned that if it responds by raising tariffs, additional tariffs will be imposed. President Trump left room for negotiation in a letter posted on Truth Social, saying, "If Canada cooperates in blocking the influx of fentanyl, the content of this letter may be adjusted."
Art Hogan, chief market strategist at B. Riley Wealth Management, said, "Up until this week, hawkish trade rhetoric has not had a negative impact on the market," adding that, "The sudden tariff announcement regarding major trading partners, including Canada, shocked the market."
Despite this situation, major tech stocks generally rose. The expectations of performance growth due to AI (artificial intelligence) played a role alongside Trump's tariffs. It appears there was a sentiment to invest in so-called "safe assets." Nvidia rose 0.5%, continuing to reach new all-time highs. Amazon increased by 1.24%, Alphabet by 1.46%, Tesla by 1.17%, and Microsoft by 0.37%, while Apple and Meta fell by 0.59% and 1.34%, respectively.
Particularly, concerns grew that the unexpectedly high tariff rates might become entrenched, leading to increased government bond yields, particularly in long-term rates. As of 4:30 p.m., the global government bond benchmark, the 10-year government bond yield, registered a rise of 7.1 basis points (1 basis point = 0.01 percentage points) to 4.417%. The 2-year government bond yield, which is sensitive to Federal Reserve policies, also increased by 2.1 basis points to 3.889%.