The moves were driven largely by the expectation that tariffs and a possible full-blown trade war would stoke inflation.
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The Lede
Markets were rattled as the week kicked off, with traders fleeing risk assets and bracing for the impact of heavy tariffs on America's top trading partners. The tariffs, which Trump imposed over the weekend and are set to officially begin Tuesday, would levy a 25% charge on imports from Canada, while China would be hit with a 10% tariff. Meanwhile, a 25% tariff on Mexico that was also supposed to go into effect was delayed a month after Trump and Mexico's president struck a deal on border policy.
Key Details
- Stocks and crypto tumbled on Monday, while the US dollar and oil climbed.
- Investors are reacting to the expectation that Trump's tariffs could be inflationary. If that scenario plays out, it could prompt the Federal Reserve to be more conservative with rate cuts and even hike rates.
- That, in turn, would raise the cost of capital for corporations and erode future earnings.
