Tariff Fears Temporarily Calmed After Pause Reached with Canada and Mexico
by Sequoia Financial Group
by Sequoia Financial Group
The S&P 500 ended the week down 0.2% after initially recovering from Monday’s headlines.1 On Saturday the White House had announced 25% tariffs on Canadian and Mexican imports and an additional 10% tariff on Chinese imports.2 Equity markets quickly reacted, fearing lower earnings growth. Although Canada initially retaliated, both Canada and Mexico reached agreements to delay tariff enactment till next month.3
By Wednesday, the S&P 500 Index had recovered all its initial losses for the week. Not all sectors fared so well, however. The S&P Automobiles Industry Index declined 10.3% over the week.1 One estimate noted that 50% of the top-50-selling car models in the US would be directly impacted by tariffs.4 Ford (ticker: F) CEO Jim Farley warned tariffs would damage the US automotive industry.5 F closed the week down 8.3%.1
In other markets, gold benefited from tariff uncertainty. Investors view gold as a safe haven and an inflation hedge. SPDR Gold Shares ETF (GLD) closed the week up 2.2% and is up 10.1% year to date.1
Tech stocks partially recovered from last week’s sell-off triggered by Chinese firm DeepSeek’s announcement of surprising advancements in its AI models despite not having access to the most advanced computer chips. This didn’t seem to scare Microsoft, Amazon, Meta, or Amazon, which all announced plans to increase AI capex in 2025 over 2024 levels.6 Amazon CEO Andy Jassy stated that his company has never seen instances in which lower costs of technology components have led to lower spending. The belief in the Jevons Paradox, which states that efficiency leads to higher consumption of a resource, appears to have boosted many tech stocks.7 NVIDIA (NVDA) was up 8.1% this week, after falling 15.8% last week.1
A down market on Friday left the S&P 500 in red territory for the week. Despite the news of the unemployment rate declining month over month to 4%8, the University of Michigan Consumer Sentiment Survey indicated deteriorating consumer confidence. Tariff uncertainty and expectations of higher inflation appear to have caused jitters among consumers.9
Investors will be watching for potential tariff wars in the weeks ahead. JP Morgan estimates that tariffs could erase 67% of the S&P 500’s anticipated earnings growth over the next 12 months if they are fully implemented.10 Although the US has reached a pause with Mexico and Canada, a trade war with China could be heating up: China’s retaliatory tariffs are in effect as of today (Monday, February 10).11
1Morningstar Direct
2https://www.wsj.com/economy/trade/trump-says-tariffs-are-coming-on-computer-chips-steel-and-more-cef9974c?
3https://www.wsj.com/politics/policy/trumps-move-to-put-tariff-hikes-ahead-of-tax-cuts-has-spooked-almost-everyone-7b9b1813?
4https://www.coxautoinc.com/market-insights/tariffs-across-north-america-will-upend-the-auto-industry/
5https://www.barrons.com/articles/ford-stock-trump-tariffs-3a3fbf4c
6https://www.wsj.com/tech/ai/tech-giants-double-down-on-their-massive-ai-spending-b3040b33?mod=hp_lead_pos1
7https://finance.yahoo.com/news/amazon-doubles-down-ai-massive-235417540.html
8https://www.bls.gov/news.release/pdf/empsit.pdf
9https://www.wsj.com/economy/consumers/americans-jittery-over-inflation-university-of-michigan-survey-suggests-1476cf39
10JPMorgan Chase & Co. (February 5, 2025). Equity Thematic Strategy: Impact of Tariffs on Global Equities
11https://www.brookings.edu/articles/chinas-retaliatory-tariffs-will-hurt-trump-voting-counties-most/
The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.
Tariff Fears Temporarily Calmed After Pause Reached with Canada and Mexico