TLDR
- Stock futures rose after Commerce Secretary Howard Lutnick hinted at possible tariff relief for Canada and Mexico
- Markets previously fell sharply after Trump implemented 25% tariffs on Canada and Mexico, and doubled duties on China
- The S&P 500 erased its post-election gains amid trade war concerns
- Canada has already implemented retaliatory duties, while Mexico plans to announce countermeasures over the weekend
- President Trump addressed market concerns in a speech to Congress, saying a “little disturbance” from the tariffs was acceptable
Stock futures jumped Wednesday morning as traders responded to hints that the Trump administration might scale back recently implemented tariffs on Canadian and Mexican imports. The potential compromise comes just a day after a sharp market sell-off that erased the S&P 500’s post-election gains.
Commerce Secretary Howard Lutnick suggested Tuesday evening that an existing Trump trade deal could provide a pathway to relief for some imports from Canada and Mexico. Speaking on Fox Business, Lutnick indicated the U.S. might meet these trade partners “in the middle” to “work something out” on tariffs.
The news sparked optimism in pre-market trading. S&P 500 futures rose approximately 0.6%, while Dow Jones Industrial Average futures gained 0.5%. Contracts on the tech-heavy Nasdaq 100 showed the strongest response, climbing 0.8%.
These gains represent a dramatic shift from Tuesday’s market performance. The Dow dropped more than 650 points after Trump implemented the delayed 25% tariffs on Canada and Mexico, while also doubling duties on China.
The market reaction was swift and broad. The S&P 500 completely erased its post-election gains. The tech-heavy Nasdaq had dipped more than 2% at its lowest point Tuesday and came within striking distance of correction territory.
Companies particularly sensitive to trade tensions showed signs of recovery in Wednesday’s premarket trading. Automakers Ford, General Motors, and Stellantis all rose before the bell, as did restaurant chain Chipotle and alcohol maker Constellation Brands.
The trade dispute has already prompted retaliatory measures. Canada responded with duties of its own almost immediately after the U.S. tariffs took effect. Mexico announced it would unveil its countermeasures over the weekend.
President Trump addressed market concerns during a Tuesday night speech to Congress. “There’ll be a little disturbance, but we’re OK with that. It won’t be much,” Trump told lawmakers.
The President defended his trade policies during the address. “Tariffs are about making America rich again and making America great again,” Trump said, referencing his campaign slogan. “It’s happening, and it will happen rather quickly.”
Trump “introduces uncertainty” to markets
Market strategists have expressed concern about the economic impact of escalating trade tensions. Michael Green, chief strategist at Simplify Asset Management, noted that Trump “introduces uncertainty” to markets. “We now are at a point where a single tweet or a single release of information can change the interpretation of what markets look like,” Green said.
The potential for a mounting trade war has raised questions about long-term economic prospects. Green suggested that tariffs could create a “forced savings regime” that might “negatively affect employment, negatively affect wealth.”
Traders are closely watching for signals that might indicate how far the trade dispute will go. The possibility of relief for Canada and Mexico represents the first hint that compromises might be possible.
Wednesday’s trading session will also be influenced by new economic data. The ADP National Employment Report will offer insight into private payroll growth, potentially providing clues about the overall health of the labor market.
The purchasing managers’ index for February will also be released, offering another measure of economic activity. These indicators could help traders assess whether the economy remains strong enough to withstand trade pressures.
Retail earnings will add another dimension to market activity. Abercrombie & Fitch is scheduled to report results, which may provide insight into consumer spending patterns.
The market recovery, while welcome news for investors, remains tentative. Any developments in trade policy — either toward resolution or further escalation — could quickly shift market sentiment in the days ahead.
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