Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure:
Financial markets experienced sharp volatility following U.S. President Donald Trump’s Imposes New Tariffs on China, Mexico, and Canada.
This move caused widespread disruptions in stock indices,
particularly as the increasing influence of technology weighed on markets.
The announcement comes at a time of growing concerns about a slowdown in the tech sector,
leaving investors in a state of cautious anticipation amid unexpected economic changes.

Contents

Trump’s Tariffs

Market Volatility

Tech Stocks Performance
Magnificent Seven

AI Hype

Deep Seek’s Impact

Trump’s Tariffs Sink U.S. Stock Indices After ‘Deep Seek’ Shock

Rapidly changing tariff news surprised traders across various asset classes on Friday,
breaking the deadlock fueled earlier by easing concerns over the tech sector.
The White House confirmed that President Donald Trump plans to impose tariffs on
China, Mexico, and Canada will start on Saturday, raising the dollar and causing stocks to decline.

The S&P 500 index gave up gains of nearly 1%, while the dollar surged,
recording its strongest weekly performance since November after confirming 25% tariffs on Mexico and Canada and 10% on China.
The U.S. government denied reports suggesting a one-month delay in implementation,
which briefly pushed the dollar lower.
The Canadian dollar fell by 0.2%,
while the Mexican peso remained relatively stable.
Meanwhile, Oil prices rose after Trump announced that tariffs would apply to crude oil.

Market Volatility Due to Tariffs

On Friday, President Trump stated that he would impose tariffs on a wide range of imports in the coming months,
including steel, aluminum, oil, gas, pharmaceuticals, and semiconductors.
This escalated his threats of new tariffs against trade partners. He also hinted that the U.S. might take action against the European Union.

Daniel Skelly, head of market research at Morgan Stanley, commented:
“We warned of potential volatility linked to tariffs, and today, we see that reflected in the markets.”

He added:
“Just like with the AI news on Monday, many questions remain unanswered,
and the landscape could change in the coming days.”

After a positive start, stock markets were affected by fears that a low-cost
AI model from the Chinese startup Deep Seek could impact the valuations of major tech companies.

Max Gokhman from Franklin Templeton Investment Solutions stated:
“Bullish investors have done their best to hold on and push forward despite the disruptions this week,
but uncertainty prevents them from supporting stocks with confidence.”

He added:
“As the weekend approaches, even those closest to the White House don’t have all the details,
so some bullish traders have opted for caution to avoid a potential storm.”

The S&P 500 fell 0.5%, the Nasdaq 100 declined 0.1%, and the Dow Jones Industrial dropped 0.8%.

Meanwhile, the Bloomberg Dollar Spot Index rose 0.4%,
while the 10-year Treasury yield increased by two basis points to 4.54%.

Tech Stocks Performance

Tesla shares rose after the company projected a positive outlook for car sales despite challenges in 2024,
while Meta shares rebounded after initially declining after the announcement of the announcement of earnings.
Conversely, IBM’s stock jumped on strong results, while Microsoft’s fell due to slowing growth in its cloud computing business.

Elsewhere, SoftBank shares fluctuated following reports that the company is considering a $25 billion investment in OpenAI.
The volatility in major tech stocks remains a significant concern on Wall Street,
as the performance of the S&P 500 is increasingly reliant on a small number of companies
an unprecedented trend in over 20 years.
Michael Hartnett from Bank of America noted that fewer
than one-third of S&P 500 companies have outperformed the index over the past two years.

From “Magnificent Seven” to “Languishing Seven”

Hartnett warned that big tech companies that have driven market gains since 2022 could soon become the “Languishing Seven,”
suggesting that investors might shift towards cheaper international stocks instead of chasing expensive U.S. equities.

He stated:
“The American exception is now exceptionally expensive and concentrated in the hands of very few companies.”

According to Matt Maley from Miller Tabak+Co, recent developments could undermine expectations for tech earnings growth.

He explained:
“While AI remains a positive force, it may not be as powerful as markets anticipated over the past six months.”

AI Hype and Its Impact on Markets

Matt Maley from Miller Tabak+Co believes that recent market developments this week
have somewhat dampened optimistic expectations regarding the growth of AI sector profits.

Maley explained:
“We believe it won’t take long before the stock market needs to adjust to the reality that AI,
While still a positive factor, it may not be as strong as markets had anticipated over the past six months.”

A slowdown in demand for AI chips, along with the emergence of Deep Seek technology,
AMD, Qualcomm, and Arm Holdings are expected to dominate the landscape as they release their financial results.

Meanwhile, Alphabet (Google) faces questions about reducing the costs of developing its AI tools
amid increasing competition from Deep Seek and low-cost AI technologies.
However, strong demand for cloud services is expected to support Alphabet and Amazon,
which remain among the most influential companies in the sector.

John Belton from Gabelli Funds stated:
“Deep Seek will remain a key focus in the sector.
It has achieved significant engineering breakthroughs that could help other AI labs develop more efficient models.
However, many of the figures associated with these discoveries may be misleading.
This is more of an evolution than a groundbreaking revolution,
aligning with the natural progression of computing efficiency over time.

The Impact of ‘Deep Seek’ on Markets

The emergence of Deep Seek rattled markets earlier this week,
However, a Bloomberg Market Live Pulse survey showed that most investors expect only a limited impact on major tech players.
Among 260 investors surveyed, 88% believed that the new AI technology
which erased $784 billion in market value from S&P 500 companies on Monday
will have little to no effect on U.S. tech giants in the coming weeks.

Retail investors continue to pour money into U.S. stocks,
injecting $8.1 billion into equities over the past week—the most significant inflow in two years, according to an analysis by J.P. Morgan.

Solita Marcelli from UBS Global Wealth Management stated:
“The new low-cost algorithms are expected to enhance economic productivity,
supporting the broader stock market.
With a strong U.S. economy, growing earnings, lower borrowing costs,
and increased capital market activity, stocks may continue their upward trend through 2025.”

Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure

Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure

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