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Tariffs worry Wall Street over earnings hit, inflation pressure

REUTERS/Andrew Kelly/File Photo
2 Feb 2025 11:01

NEW YORK (Reuters)

Investors are bracing for a looming hit to US corporate profits and pressure on inflation after President Donald Trump on Saturday signed an executive order imposing tariffs on its largest trading partners, with markets seen as not having fully factored in risks from higher levies on foreign imports.

The president's executive order imposes a 25% tariff on goods entering the country from Mexico and Canada and 10% on imports from China, with what the White House described as "tentative plans" for these to come into effect on Tuesday at 12:01 am.

On Friday, Trump said nothing could be done by the three countries to forestall the tariffs, although he did raise the prospect of exempting oil from Canada.

The tariffs include a 10% levy on all Canadian energy supplies imported by the United States.

"I do think the markets are going to react to this," said Mark Malek, chief investment officer at Siebert Financial in New York. "Until now the market has really been on Trump's side, but that could change and the market could challenge him for the first time."

As rumours of the details leaked out on Saturday afternoon, some investors still clung to hopes that the process might just be brinkmanship by the White House and that until the tariffs begin to be levied on importers, there is room for the president to walk back his plan.

The potential to drive up consumer prices is a particularly sensitive area for investors, who are worried about a revival in inflation causing the Federal Reserve to stop cutting interest rates.

The US central bank last week paused its rate-cutting cycle, while Fed Chair Jerome Powell said officials were "waiting to see what policies are enacted" with the new president.

Investors widely expect some kind of selloff in stocks and other higher-risk assets when markets reopen on Monday.

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