Dow Jones futures dip as Trump’s copper tariff hits investors’ confidence
- Dow Jones futures drop 0.28% with Trump's copper tariffs weighing on risk appetite.
- Higher copper prices will affect all industries, increase inflation, and probably cause supply chain disruptions.
- On Wednesday, the Fed minutes heightened hopes of at least one rate cut in the next months.
Dow Jones Index Futures point to a negative opening on Thursday as investors’ concerns about the consequences of Trump’s copper tariffs to the US industry offset the positive impact of the dovish tilt observed in the FOMC minutes.
All the main Wall Street index futures are in the red today. The Dow Jones Industrial Average is showing the most significant drop, with a 0.23% decline, while the S&P 500 Index dips 0.18% and the Nasdaq technology index falls 0.13% at the time of writing.
Trade tariffs keep weighing on risk appetite
The risk-on mood seen on Wednesday seems to have vanished today, as investors come to terms with the potential impact of Trump’s 50% tariff on copper products. Higher copper prices will affect all industries, from the automotive to the construction and the sustainable energy sectors, ultimately boosting inflation and potentially causing supply disruptions.
On Wednesday, the minutes of the latest Federal Reserve meeting highlighted a deep division within the committee, with most policymakers seeing it as appropriate to cut interest rates at least once before the end of the year.
The Fed’s dovish party believes that the inflationary impact of tariffs will likely be temporary and that longer-term inflation expectations will remain well anchored. A couple of officials were willing to cut interest rates at the next meeting.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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