Markets move higher as afternoon deadline looms
Major stock indexes recovered Wednesday afternoon from earlier flat trading as investors awaited the final form of Trump's tariffs announcement this afternoon.
The S&P 500 was up about 1%, while the tech-heavy Nasdaq was 1.3% higher. The Dow Jones Industrial Average climbed 0.8%.
How Trump's tariffs could affect China
The trade war that U.S. President Donald Trump has escalated in his second term is a challenge for all Asian economies, large and small, in an era when the most populous region of the world is expected to drive global economic growth.
Export manufacturing and free trade helped transform China and other Asian countries into economic powerhouses over the past decades. Trump’s barrages of tariffs, aimed at compelling companies to keep or set up their factories in the United States, are rupturing trade agreements often made at great political cost to trading partners.
Despite some decrease in trade since Trump launched a trade war with China during his first term in office, the U.S. trade deficit has continued to climb, hitting $295.4 billion last year.
China, the world’s No. 2 economy, has leaned heavily on exports to make up for weak demand at home. The ruling Communist Party has made exports of autos, especially electric vehicles, and batteries a priority, but 27.5% tariffs on auto exports and 102.5% duties on EVs have in effect closed the U.S. market for its automakers. China is the second-largest supplier of auto parts to the U.S. behind Mexico.
During Trump’s first term, higher tariffs led leader Xi Jinping to champion a shift to high-tech production. That will likely continue as U.S. pressure intensifies, causing job losses due to changes in manufacturing rather than direct damage from the tariffs themselves, Raymond Yeung of ANZ Research said in a report.
As Trump has rolled out rounds of tariff hikes that have piled on an extra 20%, China has raised its own import duties, targeting U.S. farm goods. It also expanded export controls, especially on strategically important minerals used in high-tech electronics.
U.S. exports of liquefied natural gas (LNG) to China have fallen since the beginning of the year, and are expected to fall further after Beijing imposed a 15% tariff on U.S. LNG imports.
Car buyers hit the gas on purchases ahead of tariffs
Some consumers are racing to dealerships in search of a fresh set of wheels to avoid expected price hikes from the Trump administration's auto tariffs.
Several major automakers reported double-digit U.S. sales growth in the first quarter, but industry analysts say the momentum is likely to hit the brakes soon.
“Concern among consumers regarding the future of tariffs and the economy — a new economic uncertainty — is holding back the market,” Cox Automotive analysts wrote last week.
At a Honda dealership in Hempstead, N.Y., on Tuesday, shoppers said they were motivated to buy vehicles now to avoid paying more later.
“Before the storm actually drops, I want to get in and just get out,” said Floyd Wallace, who purchased a used 2019 Honda Pilot.
Dealership manager Ravel Mejia said uncertainty is running high, and he's short on solid advice to offer customers who turn up asking about tariffs. But he expects he'll have to pay more for his next shipment of vehicles after selling through his existing inventory over the coming month.
“It’s a little bit unsettling to come in tomorrow and not know what’s going to happen,” Mejia said.
What tariffs could mean for pharmaceuticals
Trump has said tariffs on pharmaceutical products imported into the U.S. were coming soon, but it is not clear if they will be announced at the White House event.
Those potential tariffs would likely drive up U.S. drug prices for patients because even if companies moved to produce those medications domestically, it would take years and cost more than producing medicines abroad, Leerink Partners analyst David Risinger said in a note last week.
Predicting the potential impact of tariffs on pharmaceutical companies is difficult since they have vast and complex manufacturing networks with multiple steps, sometimes in different geographies, TD Cowen analyst Steve Scala said in a note.
But Scala said Eli Lilly, Bristol Myers Squibb and AbbVie appear better positioned than others to weather tariffs because they have more major manufacturing plants in the U.S. than internationally.
The majority of their sites responsible for producing the active ingredients in drugs are also in the U.S., he added.
Meanwhile, Novartis and Roche “look more at risk” because they have few U.S. plants and a higher share of active ingredient sites that are international, Scala said.
Tequila maker says he plans to absorb tariff costs
Some tequila makers have been warning about how tariffs could hit their businesses, but Colorado-based Suerte Tequila said it won’t raise prices to offset tariffs.
“Tequila margins are stronger than ever,” said Laurence Spiewak, Suerte Tequila's CEO.
Still, the industry could see a hit with tariffs on Mexico.
In 2024, the U.S. imported $5.2 billion worth of tequila and $93 million worth of mezcal from Mexico, according to the Distilled Spirits Council of the U.S.
What tariffs could mean for jobs
Trump administration officials have argued that the higher costs from tariffs are worth it for the increase in manufacturing jobs that would be created over the long-term.
“I’m less concerned about the short term,” Treasury Secretary Scott Bessent told reporters last month. “We’ve got strategic industries that we’ve got to have. We want to protect the American worker, and a lot of these trade deals haven’t been fair.”
Since Trump took office, several companies have said they will increase their manufacturing in the United States, though some of those plans were already underway before Trump was elected and others will take years to come to fruition.
But while tariffs could increase U.S. manufacturing for certain products, the jobs that are created could be offset by jobs lost in other areas that faced higher costs from the tariffs — which happened during Trump’s first term, according to a study by the Federal Reserve.
Bringing manufacturing to the United States can also increase the cost of production, because labor, regulatory and building costs are higher in the United States, which in turn could raise the prices of end products for consumers. If companies do bring production to the United States, the number of jobs could also be limited because manufacturing has become more automated. Auto plants or steel mills that once employed tens of thousands of workers now employ just several thousand.
Building manufacturing plants in the United States could get even more expensive as a result of the tariffs, because it would cost more to import the building materials, parts and equipment needed for the plants.
It could be nearly impossible to make other products, like shoes or T-shirts, in the United States at competitive prices because the United States doesn’t have the available labor or supply chains to make them on a large scale.
Senate poised to vote on measure to revoke Trump tariffs on Canadian goods
The Senate is expected to vote today on a resolution of disapproval on Trump’s tariffs on Canadian imports, led by Sen. Tim Kaine, D-Va., which could mark a significant rebuke to the president.
The measure, which would terminate the national emergency Trump used to pursue the tariffs, needs a simple majority of 51 votes to pass. The chamber is split between 53 Republicans and 47 Democrats. If Democrats unify, then they need just four Republicans to pass it.
“Many of my Republican colleagues in Congress have already expressed concerns about these tariffs, so the Senate’s upcoming vote on our legislation provides senators with the perfect opportunity to show Americans that they will stand up for their constituents and reverse the President’s disastrous economic policies,” Kaine said.
Metals industry to Trump: Please spare Canada
Steel and aluminum industry groups have praised the Trump administration’s targeting of cheap imports from China. But they’re cautioning against doing the same to those from Canada, which is facing blanket 25% tariffs on all goods except energy products and potash, which the United States is set to tax at 10%.
Canada supplies over half of U.S. aluminum imports and about 20% of the nation’s imported steel. Foreign-made aluminum is especially crucial for downstream manufacturing, Charles Johnson, the CEO of the Aluminum Association, recently told NBC News.
“Without those import inputs, we won’t be able to continue to expand,” he said of the domestic industry.
Current U.S. smelting capacity simply doesn’t produce enough aluminum to meet the nation’s needs, Johnson added. “We need metal.”
The United Steelworkers labor union has also urged “a measured approach that both strengthens our manufacturing sector and accounts for our relationships with our allies, like Canada, who play by the rules,” the group said in a Feb. 10 statement.
Bill Oplinger, the CEO of Alcoa, which owns two of the four remaining aluminum smelters in the United States, said last month that he’s aligned with the administration’s desire to boost manufacturing jobs. But “the best way to do that,” he said, “is to be able to bring Canadian metal into the U.S. to support our downstream customer.”
Autoworkers president and domestic producers come out in favor of tariffs
Trump's tariffs proposals have faced opposition from business groups, criticism from economists and resistance from consumers.
But they are receiving support from some key U.S. sectors.
Among the most enthusiastic supporters has been United Auto Workers President Shawn Fain. Though he endorsed Kamala Harris in the 2024 presidential election, Fain issued a statement last week praising Trump's plans to impose 25% tariffs on all autos and auto parts entering the U.S.
"The UAW has been clear: We will work with any politician, regardless of party, who is willing to reverse decades of working-class people going backwards in the most profitable times in our nation’s history," he said. "These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.”
The head of the steel manufacturers' association has also hailed Trump's plan to impose 25% duties on steel and aluminum imports, writing in the Pittsburgh Post-Gazette last month that the levies were "saving the American steel industry."
And the Coalition for a Prosperous America, which represents certain domestic producers and workers, has long favored the use of tariffs to bolster U.S. industry.
"Those who warn of tariff problems exaggerate the price costs and ignore the positive effects that come from expanded domestic manufacturing," CPA economist Andrew Eichenberg wrote recently. "That’s unfortunate because the overall goal should be to create good-paying jobs throughout the U.S. economy."
He continued: "For too long, economists have ignored the real-world benefits of protecting and rebuilding America’s industry. Instead, they have exaggerated globalization’s ability to keep prices low. They’ve also disregarded the collateral damage from decades of rising imports — including millions of lost jobs and volatile inflation from overseas supply chain disruptions."
Uncertainty reigns for businesses
With the White House offering only breadcrumbs in the hours leading up to Trump’s tariff announcement, uncertainty is weighing on both consumers and businesses.
At a Subaru dealership in Skokie, Illinois, the pace of sales over the past week has more than doubled as people rush in to buy cars before new tariffs go into effect, according to general manager Jeremy Gleason.
Meanwhile, in Pomona, New York, Stuart Leventhal, owner of the Down to Earth Living furniture store, is already ordering for Christmas but isn’t sure what it’s going to end up costing.
“Doesn’t that sound stupid?” Leventhal told NBC News. “It’s an uneasy time because there seems to be no certainty. No certainty with respect to what the costs of goods are, and no certainty as to where the policies are taking us.”