The latest Market Talks covering U.S. politics. Published exclusively on Dow Jones Newswires throughout the day.
1048 ET - Trump's tariff increases were larger than expected, triggering a flight for safety in financial markets, Comerica's Bill Adams says. Stocks are down and bond prices are rising, sending yields lower "as investors have been moving out of risk assets like stocks and into risk-free assets like long-term Treasurys," he says. Futures pricing indicates higher odds of interest rate cuts by the Fed, but Adams says the pricing is likely a reflection of higher demand for bonds and not necessarily bets on monetary policy. "The economy would have to deteriorate quite a bit for the Fed to cut rates while inflation is rising in the next 12 months," he says. (paulo.trevisani@wsj.com; @ptrevisani)
1047 ET - New tariffs complicate things for building products players Masco, Fortune Brands Innovations and Ferguson Enterprises. Just under one-third of Masco's direct input costs are sourced out of China, says Jefferies' Philip Ng in a research note. Fortune's cost of goods sold from China dropped to less than 25% from 50% and it saw around $50 million cost increase from tariffs in 2019, while Ferguson's gross margins were not impacted from the last round of Trump's tariffs. Base tariffs at 54% are larger than feared but likely to be negotiated down. "Fortune Brands Innovations, Masco and Ferguson Enterprises historically have shown good pricing power, but the magnitude of the increase could lead to demand destruction," Ng says. Masco and Fortune brands slide 10%, and Ferguson loses 4.5%. (denny.jacob@wsj.com; @pennedbyden)
1037 ET - Big Pharma could mitigate a 20% drug tariff by adjusting their transfer pricing strategy, without shifting any manufacturing to the U.S., Intron Health analysts say in a note. Transfer pricing is a way for companies to shift profits between different parts of their global operations to reduce their overall tax burden. In a scenario where the U.S. corporation tax rate falls to 15% alongside 20% tariffs, Big Pharma profits would remain stable, while U.S. tax revenue would more than double, the analysts say. Low-tax jurisdictions like Ireland would lose out, but would at least retain their manufacturing base in the medium term, they say. (helena.smolak@wsj.com)
1035 ET - The tariff front-running boost to Canadian exports reversed sharply in February, causing the country's trade balance to swing to a C$1.5 billion deficit for the month, CIBC Capital Markets' Katherine Judge says. The result was sharply below the consensus expectation for a C$3.5 billion surplus. The economist anticipates exports will remain under pressure, since while USMCA-tied goods were exempt from tariffs introduced in March businesses in the U.S. appear to have accumulated enough inventory in prior months. Judge says export demand will also be dented for autos, steel and aluminum, and lumber, which are subject to previously announced tariffs, despite Canada escaping the latest round of so-called reciprocal U.S. tariffs. And, she adds, a higher effective tariff rate on U.S. imports as a whole will work to slow U.S. and global growth and will weigh on export demand for Canada ahead. (robb.stewart@wsj.com; @RobbMStewart)
1034 ET - The additional 34% tariff levied on Chinese goods is expected to cut into demand for American soybeans, but the timing of President Trump's announcement means that the impact may not be immediate. "China is out of the market for U.S. beans right now anyway," says Matt Zeller of StoneX in a note, saying that China at this time of year is more interested in procuring Brazilian soybeans, as Brazil's harvest of its soybean crop nears its end. But once U.S. farmers plant their soybeans this spring, they may see diminished interest from China--but not a complete absence of demand. "They will need to come back at some point for some of the 2025 crop," says Zeller. CBOT soybeans are down 1.5%.(kirk.maltais@wsj.com)
1031 ET - Lululemon's margins could see a roughly 7% headwind with no response to the latest tariffs, William Blair's Sharon Zackfia says in a research note. The bulk of the athletic-apparel company's products are sourced from countries set to be targeted with outsized tariffs put forth by President Trump. The analyst estimates the subsequent blended tariff rate for Lululemon's products at roughly 39%. "With just over 60% of sales in the US and an assumed 70% merchandise margin, the implied unmitigated tariff headwind to margins at over 700 basis points," says Zackfia. "While Lululemon's margins are strong enough to fully absorb the impact, we expect mitigation efforts will somewhat blunt the penalty to Lululemon's bottom line." Lululemon slides 13% to $246.01, part of the broader Wall Street selloff. (denny.jacob@wsj.com; @pennedbyden)
1014 ET - Canada's surprise swing to a trade deficit in February is a harbinger of the extremely volatile trade and other related data that can be expected over the next few months as firms adjust and adapt to the tariff regime the U.S. has put in place, says BMO Economics' Benjamin Reitzes. Canada's exports plunged 5.5% on-month, with declines across the board by product and to most countries, the strategist notes. And volumes weren't any better, falling 4.6% to fully retrace January's surge and then some, he says. Reitzes adds that assuming export volumes don't rebound in March, trade could weigh on 1Q GDP. (robb.stewart@wsj.com; @RobbMStewart)
1011 ET - Grain traders are processing what President Trump's tariff announcements will mean, but the results are so far mixed. "China is a major importer of US soybeans and while their buying tends to shift to Brazil at this time of year, demand going forward could be heavily impacted," says Tomm Pfitzenmaier of Summit Commodity Brokerage in a note. Meanwhile, allowances for USMCA-compliant goods from Canada and Mexico are being taken as a positive for U.S. corn export demand, Pfitzenmaier adds. Most-active CBOT corn is down 0.7%, soybeans fall 1.9%, and wheat slides 1.2%. (kirk.maltais@wsj.com)
1009 ET - The U.K. government says it is seeking the views of business on its response to U.S. tariffs. "The best interests of British business has shaped our approach throughout as we prepare for all scenarios, which is why we are asking them for their views on how these tariffs impact their operations and day-to-day lives," Business and Trade Secretary Jonathan Reynolds says. The government also has published an "indicative list" of U.S. goods imports that could be considered in a future U.K. response. The U.K. is disappointed at U.S. tariffs and will continue constructive discussions with the U.S. on wider deal, while tariffs remain the last resort, the government said in a statement. (edward.frankl@wsj.com)
1001 ET - U.S. President Trump's 20% tariff on EU imports will hurt tech companies either side of the Atlantic, lobby group Digital Europe says. "The EU and the U.S. are interconnected economies, tariffs will result in painful repercussions on the digital and digitalizing industries on both sides of the Atlantic," it says. "This is an extra tax on products that are essential for the running of the digital economy like advanced machinery, grid technologies and telecoms equipment. It's bad for both the U.S. and Europe," it adds.(edith.hancock@wsj.com)
0959 ET - Europe's commercial aerospace groups are more vulnerable to the new U.S. tariffs than defense companies because of their complex global supply chains, Quilter Cheviot analyst Matt Dorset says. In addition, Airbus has a substantial part of its order backlog from U.S. airlines, he says. The aircraft maker may shoulder some of the extra costs but it will largely pass them onto airlines, Dorset adds. Meanwhile, Europe's largest arms exporters to the U.S., such as BAE Systems, have production plants there. This insulates defense groups from the tariff threat, he adds. Airbus shares are down 2.65% at 158.36 euros, while BAE Systems is up 3.4% at 16.25 pounds. (cristina.gallardo@wsj.com)
0939 ET - Initial jobless claims through March 29 stayed limited. But there was a big uptick in continuing claims, which rose by 56,000 in the week through March 22, the latest available data. That shows slower exits from unemployment, which could mean that hiring has weakened, Samuel Tombs of Pantheon Macro writes. "The risk ahead is that this gradual upward trend in unemployment gathers momentum, as the pace of layoffs also begins to increase, boosting the flow of initial claims," he writes. (matt.grossman@wsj.com, @mattgrossman)
(END) Dow Jones Newswires
April 03, 2025 10:48 ET (14:48 GMT)
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