Dow Jones financials crash in unison as tariffs commence: Goldman Sachs, JPMorgan, American Express

The United States (US) stock market is feeling the weight of the Donald Trump administration’s tariffs on Canada and Mexico. At midnight, Tuesday, March 4, the world saw the commencement of 25% levies on Canadian and Mexican goods imported to the US. Some other goods, like Canadian oil, saw a lesser 10% levy.

This has sent US stocks spiraling. About two-thirds of the Dow Jones Industrial Average (DJIA) have traded lower in Tuesday’s morning session, while it, the S&P 500 and the NASDAQ Composite all have declined between 1.6% and 1.9%. 

Goldman Sachs (GS), JPMorgan (JPM) and American Express (AXP) have all seen their share prices hit hard. Goldman stock has slid 6% so far, while the latter two have given up more than 5%.

DJIA YTD (candlesticks) chart against performance of GS (blue), AXP (purple), JPM (orange)

Dow financials shift lower on tariff worries

Canada responded with a plan for tariffs that target $155 billion of US goods. $30 billion will go into effect immediately and target such beverages as orange juice and some US liquor products. Another $125 billion will go into effect within 21 days.

“Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” said Canadian Prime Minister Justin Trudeau in a statement.

Officials in the Canadian province of Ontario are touting a separate plan to cut US firms off entirely from nickel and uranium. Approximately half of US nickel imports come from Canada, according to Canadian government officials. Additionally, there is much talk in Canada of a general boycott of US products.

Mexican President Claudia Sheinbaum said her government would retaliate with similar tariffs on US merchandise, although few concrete details have emerged about the percentage and which goods they would cover.

Trump’s added 10% tariff on China has led to Beijing opting for additional tariffs of up to 15% on imports of chicken, pork, soy and beef, besides other US farm products. China resurrected similar agricultural tariffs on US farmers during Trump’s first administration. 

Beijing also blacklisted about 20 US firms from doing business with China and will initiate its antitrust case against Alphabet (GOOGL). Data emerged on Tuesday that Tesla (TSLA) sales had fallen 49% YoY in China as CEO Elon Musk is a major donor and official in the Trump administration.

Goldman, JPMorgan, American Express retreat

Trade wars are worrisome for all corporations, but banks in particular. They often drive up uncertainty, lead to lower economic growth or even recessions and may result in certain creditors failing to pay loans. 

The US Treasury curve is falling at the front of the curve, from 3-month bills to 5-year bonds. The longer-term 10-years and 30-years, however, are seeing their yields rise.

Part of this is higher anxiety over future rates driving investors from long tenures into short-term tenures to allow more wiggle room. Investors don’t want to get caught with long-term bonds if the trade war leads to higher inflation.

Financial institutions, in general though, don’t like uncertainty over rates and its effect on the profitability of their lending. Of course, this won’t stop them from lending. JPMorgan just joined Starwood Property Trust (STWD) to loan $2 billion for the construction of a 100-acre data center in West Jordan, Utah. 

"The president firmly believes that there are imbalances with respect to how trade exists, and he has a strong point of view that he wants to level the playing field aggressively," said Goldman Sachs CEO David Solomon at the Australian Financial Review Business Summit earlier on Tuesday.

Of interest here, Solomon also admitted that the chance of a US recession was “small, but not zero." Trump administration Treasury Secretary Scott Bessent also agreed that the economy might reach a period of slower growth as his administration cuts government spending.

Equity traders will remember that the Atlanta Fed’s GDPNow figure for Q1 showed the US GDP declining 1.5%. Two quarters in a row of declining GDP mark a recession.