Donald Trump's Tariff War Has Crashed Financial Markets, Company News, and Geopolitics

Stock market news

• Whatever investors expected from Donald Trump's tariff threats or from the retaliatory measures of the countries they targeted, they may have ended up getting more than they bargained for. Stock indices saw a sharp sell-off in Asia and, judging by futures prices for the U.S. S&P 500 index and the pan-European STOXX 50 index, sharp declines were expected worldwide.

• Short-term bonds sold off, as did virtually every currency except the U.S. dollar. Some investors expected Trump to soften his threat of 25% tariffs on neighbors Canada and Mexico and perhaps hold off on additional duties on China — or that if tariffs were imposed as promised, they would be quietly accepted. That's not what happened. The U.S. tariffs, which take effect Tuesday, will affect $1.3 trillion in goods, or more than 40% of all U.S. imports.

• Canada and Mexico immediately promised retaliatory taxes, and China vowed to challenge the tariffs in the WTO. The Wall Street Journal reported that Beijing's countermeasures would include promises to increase U.S. investment and a commitment to do more to curb exports of fentanyl precursors. 

• The White House repeatedly said last week that Trump would impose the high-profile sanctions on Saturday, but Wall Street’s losses on Friday were just half a percent for the S&P 500. Fast forward to Monday, and S&P 500 futures are pointing to a 2% drop. The outlook for Europe is even worse, with STOXX 50 futures down 2.4%, perhaps unsurprising given that Trump said over the weekend that tariffs on the EU were “definitely coming.” In Asia, mainland China markets will remain closed until Wednesday for the Lunar New Year holiday, but trading has resumed in Hong Kong, although shares there have fallen much less than many other bourses in the region, including Australia, Japan and especially Taiwan. Some analysts say Trump’s tariff decision puts the ball in Beijing’s court, raising hopes for more stimulus.

• Meta plans to re-register from Delaware to Texas - WSJ. The social media company has reportedly discussed potential changes with Texas officials, with discussions beginning before the new Trump administration took office.
The change in registration will not result in a move of its corporate headquarters, the WSJ said.

• Chevron (CVX) suffered a big drop, falling 4.6% after reporting its first quarterly loss in its refining business since 2020, partly due to tariffs announced.
The energy sector as a whole has been in decline, and Chevron is trying to maintain its operations in Venezuela amid geopolitical tensions.

• Apple (AAPL) has decided to end work on its cutting-edge augmented reality glasses project, codenamed N107, which was originally intended to be paired with its devices. The decision came after efforts to redesign the product and connect it to the Mac failed to meet expectations during executive reviews. The move reflects a strategic shift as Apple focuses on other technology initiatives.

• Walgreens Boots (WBA) fell 10% after suspending its quarterly dividend for the first time in 92 years. Reports suggest private equity firm Sycamore Partners is exploring a potential takeover, possibly including selling off health care businesses such as VillageMD to address debt and litigation issues.

• Petrobras (PBR) announced a diesel price increase in line with international market rates, the first price increase in a year and reflecting the Brazilian government's approval to adjust prices in response to changing market conditions.

• MrBeast and Roblox CEO want to buy TikTok for $20-25 billion - Bloomberg. Jimmy Donaldson (MrBeast) and a group of investors have already made an offer to the platform's owner, ByteDance.

• EU to hold Temu, Shein and Amazon liable for 'dangerous' goods - FT Customs reforms will force online platforms to provide data before shipping goods.

• JPMorgan is deeply skeptical of Wall Street's upbeat reaction to Tesla's (TSLA) earnings. "Tesla's stock rally has no bearing on the company's financial results for the quarter," JPMorgan said.

• Morgan Stanley's top equity strategist believes the market is at a "sweet spot" when it comes to interest rates. The Fed made the right call by pausing this week. "I'm not sure the pause is all that bad for stocks in the short term," said Mike Wilson.

• Starbucks, Workers United Agree to Drop Lawsuits - Bloomberg Starbucks Corp. and Workers United have agreed to drop lawsuits against each other, taking another key step toward a contract for union workers.

• New rules helped Tesla make $600 million in bitcoin profits, but could cost MicroStrategy (MSTR) billions. New accounting rules have changed the way public companies report their bitcoin holdings, leading to a $600 million profit for Tesla but potentially leading to a multibillion-dollar tax bill for MicroStrategy.

• The Texas Stock Exchange (TXSE) plans to launch in 2026 after filing paperwork to operate as a national securities exchange, its parent company said Friday.

 Key events that could impact markets on Monday:
- US tariff response
- Eurozone preliminary HICP (January)
- Julius Baer earnings
- St. Louis Fed President Musalem and Atlanta Fed President Bostic to speak at separate events

Fundamental news

• Trump signed three executive orders imposing tariffs on goods from Canada, Mexico and China. One order per country. A tariff of 25% was imposed on Canada and Mexico. An exception is Canadian energy, which is rated at 10%. A tariff of 10% was imposed on China on all goods. The new tariffs of 25% on goods from Mexico and Canada and 10% on goods from China could potentially disrupt more than $2.1 trillion in annual trade - Reuters.

• We are going to take the Panama Canal back, - US President Donald Trump.

• Trump said he had ordered airstrikes on targets in Somalia where terrorists were located. No civilians were harmed in the attacks, the US president noted.

• The US Senate has confirmed Doug Burgum as Secretary of the Interior - Voice of America In the US, the title of Secretary of the Interior has a very different meaning than in most countries. It is the US "secretary of land and natural resources." Law enforcement falls under a different agency.

• Elon Musk has donated $288 million to the 2024 election - WP. The scale of Musk's financial support has cemented his status as the "largest political donor" of the election cycle.

• The U.S. Agency for International Development (USAID) could lose its independence and end up under the control of the State Department - Politico
Discussions are currently ongoing in the Trump administration. Other sources told the publication that they do not know the details, but USAID will definitely lose its independence.

• Fico accused the Czech Republic of interfering in Slovakia's internal affairs. The Czech prime minister rejected Fico's accusations, calling them "absurd."

• Germany rejects Trump's demand to spend 5% of GDP on defense. Defense Minister Boris Pistorius said Germany could not afford such defense spending. According to him, 5% of Germany's GDP on defense would correspond to 42% of its federal budget, which would amount to €230 billion.

• German conservative leader Friedrich Merz has lost a key vote in the Bundestag. This could significantly affect his chances of becoming chancellor - DW.
The bloc's bill to restrict migration was rejected by 349 to 338.

• Moldova has begun supplying gas to Transnistria after Russian transit was stopped. The EU will foot the bill. Heat and electricity supplies to Transnistria will be restored in the coming days.

• Iran says it will respond 'strongly' if US or Israel strikes its nuclear facilities - Al Jazeera

• China's house prices and sales continued to fall in January, report shows. The average price per square meter of existing residential properties fell just over 7 percent in January from a year earlier, based on a survey of markets in 100 major Chinese cities, the China Index Academy said in its monthly report.