Markets Plunge as U.S. Imposes Broad Tariffs, Trade Tensions Escalate

Global financial markets faced a turbulent session on Monday as U.S. President Donald Trump escalated trade tensions by imposing broad tariffs on imports from Canada, Mexico, and China. These measures, which include 25% duties on Mexican and Canadian goods and 10% on Chinese imports, have heightened concerns about economic stability, inflation, and potential retaliatory actions from affected nations. Stock markets responded sharply, with U.S. futures plummeting—Nasdaq futures dropped 2.35%, S&P 500 futures fell 1.8%, and oil prices surged over $2 per barrel.

In response to the U.S. tariffs, Canadian Prime Minister Justin Trudeau announced retaliatory measures, while Mexican President Claudia Sheinbaum is expected to outline Mexico’s countermeasures soon. China also vowed to implement "counter measures," warning that American consumers could face economic hardship as a result. The uncertainty surrounding the scope and duration of these tariffs has further rattled markets already shaken by last week’s tech stock downturn, triggered by China’s DeepSeek AI model. Analysts warn that these trade restrictions could pressure corporate profits, drive up inflation, and diminish expectations for U.S. interest rate cuts, putting additional strain on currencies such as the Canadian dollar and the Chinese yuan.

Despite some advance warning about the tariffs, their actual implementation has intensified market volatility. Trump’s executive order includes provisions for even higher tariffs if the targeted countries retaliate, and he has hinted at broader trade restrictions in the future. The move has already caused the U.S. dollar to strengthen while weakening the Canadian and Mexican currencies. Meanwhile, with Chinese markets closed for the Lunar New Year, the yuan's reaction remains uncertain.

Market strategists remain divided on the long-term impact of Trump's tariffs. Some believe they will be short-lived due to potential economic fallout, while others caution that prolonged trade barriers could significantly slow global growth. Morgan Stanley analysts predict a 3%–5% market correction, while Barclays estimates a 2.8% earnings drag on S&P 500 companies. Additionally, Goldman Sachs projects that broad-based tariffs on Canada and Mexico could push U.S. core inflation up by 0.7% and reduce GDP growth by 0.4%.

Beyond trade tensions, investors are also bracing for major economic data releases and corporate earnings reports. The upcoming U.S. nonfarm payrolls report will offer key insights into labor market strength, which could influence Federal Reserve policy. Additionally, major tech firms such as Alphabet, Amazon, and Qualcomm are set to release quarterly earnings, with particular attention on AI-related expenditures. The recent sell-off in tech stocks, fueled by concerns over capital spending on AI and competition from China's DeepSeek, has raised questions about the sustainability of large-scale AI investments.

Amid this economic uncertainty, investors are closely watching the evolving trade landscape, the Federal Reserve’s next moves, and corporate earnings to gauge the broader impact on markets. While late-stage AI and semiconductor firms offer some stability, smaller high-growth startups also present opportunities if valuations adjust. With the potential for further economic disruptions, markets are expected to remain volatile in the coming months.

Data for Technical Analysis (15Min) CFD US30 DJIA

Resistance : 44029.2, 44054.9, 44096.3

Support : 43946.4, 43920.7, 43879.3        

15Min Outlook 

Source: TradingView                                            

Buy/Long 1 If the support at the price range 43912.4 - 43946.4 is touched, but the support at 43946.4 cannot be broken, the TP may be set around 44040.1 and the SL around 43895.4, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 44029.2 - 44063.2, TP may be set around 44148.6 and SL around 43929.4, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 44029.2 - 44063.2 is touched, but the resistance at 44029.2 cannot be broken, the TP may be set around 43931.6 and the SL around 44080.2, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 43912.4 - 43946.4, TP may be set around 43823.1 and SL around 44046.2, or up to the risk appetite.       

Pivot Points Feb 3, 2025 08:42AM GMT