Stocks sink as investors fret over volley of tariffs

Even good news on U.S. inflation isn’t assuaging jittery investors focused on the risks of a burgeoning global trade war.

Stocks in the U.S. opened slightly lower amid the latest salvo from President Trump, who on Thursday threatened to slap a 200% tariff on European Union exports of wine, champagne and other alcoholic beverages in retaliation for the trading bloc’s hiking of duties on American whiskey to 50%. The EU announced the measures in response to U.S. tariffs on foreign steel and aluminum taking effect on Wednesday. 

“Trump’s trade agenda is dominating everything, and until there is a cessation in the daily escalation of threats and retaliation, stocks will struggle to rally,” equity analyst Adam Crisafulli of Vital Knowledge told investors in a research note.

The S&P 500 was down 60 points, or 1.1%, to 5,539 as of noon Eastern time. The Dow Jones Industrial Average dropped 416 points, or 1%, while the Nasdaq Composite sank 1.5%.

The S&P 500, which peaked in February after rising in the weeks following Mr. Trump’s re-election in November, has given up those gains and is now down roughly 6% on the year. Since January, the blue-chip Dow and tech-heavy Nasdaq have slipped 4% and 10%, respectively.

Rising uncertainty stemming from the White House’s aggressively protectionist trade policies and mounting concerns about the strength of U.S. economic growth are outweighing recent signs that inflation is easing. Costs for Americans edged down in February, according to Consumer Price Index data released on Wednesday.

“Part of the reason for the limited response to yesterday’s CPI data is that growing concerns about the U.S. economy have taken the focus off the risks of higher inflation related to President Trump’s tariff policies,” John Canavan, lead U.S analyst at Oxford Economics, said in a report. 

For now, most Wall Street analysts downplay the risks of an immediate recession, noting that the job market remains healthy. But a slew of signals suggest the economy is starting to lose momentum, including weaker corporate earnings, eroding consumer confidence and stingier retail sales.

“You look at the economy today, you see a weakening,” JPMorgan Chase CEO Jamie Dimon said on Wednesday at a retirement event in Washington, D.C., held by asset management giant BlackRock and the Bipartisan Policy Center. “Consumer still spending money. Jobs are still plentiful. Wages are still going up. CPI has kind of leveled off a little bit, but you do see a weakening in sentiment and certain kinds of spending that people consider more discretionary.”

The prospect of slowing growth, along with stubbornly elevated prices for food, rent and other staples, has aroused concerns that the U.S. could eventually face “stagflation,” or when economic activity sinks even as inflation remains high. 

The crosscurrents buffeting the economy are complicating life for policymakers at the Federal Reserve, who must balance their ongoing effort to douse inflation with their mandate to keep the economy on track. Analysts with Morgan Stanley predicted Thursday that the central bank will leave its benchmark interest rate unchanged at its next meeting on March 18-19.

“The core messaging from the January meeting, where Chair [Jerome] Powell emphasized the Fed was ‘not in a hurry’ to make adjustments to policy, is likely to remain in place in March,” they wrote in a report.