[New York Stock Market] Trump Narrows Losses on Mexico Tariff Delay... Dollar and Bonds Rise

Trump Agrees to One-Month Tariff Delay on Mexico
Negotiations Continue with Canada... "Will Talk with China Within 24 Hours"
Market Cuts Early Losses After Sharp Drop... Uncertainty Remains
Safe-Haven Preference Expands... Dollar and Treasury Prices Rise

The three major indices of the U.S. New York stock market all closed lower on the 3rd (local time). The New York stock market, which started sharply down due to the 'tariff bomb' dropped by U.S. President Donald Trump, significantly reduced its losses in the morning as the U.S. decided to delay tariff measures on Mexico by one month. However, the uncertainty over tariffs persisted, and the market failed to rebound. Due to the spread of safe-haven asset preference, the value of the U.S. dollar and bond prices rose, mainly in long-term bonds.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 44,421.91, down 122.75 points (0.28%) from the previous trading day. The large-cap-focused S&P 500 index fell 45.96 points (0.76%) to 5,994.57, and the tech-heavy Nasdaq index slid 235.49 points (1.2%) to close at 19,391.96.

By individual stocks, automobile shares with production bases in Mexico showed weakness. General Motors (GM) dropped 3.15%, and Ford fell 1.75%. Auto parts maker Aptiv and manufacturer Avery Dennison, which produces automotive wrapping, declined 2.79% and 1.23%, respectively. Engine manufacturer Cummins also fell 2.26%. Constellation Brands, which imports alcoholic beverages from Mexico, dropped 3.53%.

The New York stock market started sharply down that day. This was the aftermath of President Trump signing an executive order on the 1st to impose a 25% tariff on all imports from Canada and Mexico and an additional 10% tariff on all imports from China on top of existing tariffs starting at midnight on the 4th. The three countries immediately announced retaliatory measures. Furthermore, President Trump stated the previous day that "tariffs will soon be imposed on European Union (EU) products," signaling an expansion of the tariff war front. As the global trade war ignited, concerns arose that supply shock-driven inflation would occur, sharply worsening risk asset investment sentiment.

However, on the morning of the 3rd, a day before the tariff measures were to take effect on the 4th, President Trump announced a one-month delay of tariff measures on Mexico, somewhat easing investors' fear. This was due to Mexican President Claudia Sheinbaum's promise to deploy 10,000 troops to the border to crack down on fentanyl and illegal immigration. President Trump also held phone calls with Canadian Prime Minister Justin Trudeau in the morning and again at 3 p.m. to conduct last-minute negotiations. He said he would "probably talk with China within 24 hours," leaving room for negotiation. As a result, the market reduced losses amid expectations that a full-scale trade war could be avoided. However, the continued tariff uncertainty prevented the indices from rebounding.

In the market, cautious views are emerging that President Trump's tariff card is a 'negotiation tool' and that investors need not overreact.

Thierry Wiseman, Global FX and Rates Strategist at Macquarie, said, "We believe the U.S. will not impose permanent tariffs on allies," adding, "The easier way for President Trump to handle the issue is to make concessions, and he likes deals."

Victoria Green, Chief Investment Officer (CIO) at G Square Asset Management, said, "The situation is very fluid right now," diagnosing, "Our base scenario is that the current situation is very temporary and likely to be diluted through concessions." She added, "We are monitoring future progress and watching the impact on corporate earnings, the U.S. dollar, and inflation."

Investors are paying attention to major events scheduled this week while evaluating the development of President Trump's tariff measures. Alphabet, Google's parent company, will release earnings on the 4th, and Amazon will report on the 6th. The U.S. Department of Labor's January employment report, which provides insight into the labor market, will be released on the 7th. The market expects nonfarm payrolls to have increased by 154,000 last month, a significant decrease compared to the previous month’s 256,000. The unemployment rate is expected to remain steady at 4.1%.

Due to the expansion of safe-haven asset preference caused by President Trump's tariff hikes, the U.S. dollar and bond prices are rising, mainly in long-term bonds.

The dollar index, which measures the value of the U.S. dollar against the currencies of six major countries, is currently at 108.78, up 0.52% from the previous trading day. Bond yields, which move inversely to bond prices, are weak. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 3 basis points (1bp = 0.01 percentage points) from the previous day to 4.53%. However, the U.S. 2-year Treasury yield, sensitive to monetary policy, is moving around 4.245%, up 1 basis point from the previous day.

This content was produced with the assistance of AI translation services.