ASX set to fall after volatile Wall Street session as trade war escalates

The tariffs are prompting warnings from retailers, including Target and Best Buy, as they report their latest financial results. Target fell 3 per cent despite beating Wall Street’s earnings forecasts, saying there will be “meaningful pressure” on its profits to start the year because of tariffs and other costs.

Best Buy plunged 13.3 per cent for the biggest drop among S&P 500 stocks after giving investors a weaker-than-expected earnings forecast and warning about tariff impacts.

“International trade is critically important to our business and industry,” said Best Buy CEO Corie Barry.

Barry said China and Mexico are the top two sources for products that Best Buy sells, and it also expects vendors to pass along tariff costs, which would make price increases for American consumers likely.

Imports from Canada and Mexico are now to be taxed at 25 per cent, with Canadian energy products subject to 10 per cent import duties. The 10 per cent tariff that Trump placed on Chinese imports in February was doubled to 20 per cent.

Retaliations were swift.

China responded to new US tariffs by announcing it will impose additional tariffs of up to 15 per cent on imports of key US farm products, including chicken, pork, soy and beef, and expanded controls on doing business with key US companies. Canada plans on slapping tariffs on more than $US100 billion ($160 billion) of American goods over the course of 21 days. Mexico also plans tariffs on goods imported from the US.

Companies in the S&P 500 are wrapping up the latest round of quarterly financial reports. They’ve posted broad earnings growth of 18 per cent for the fourth quarter. But Wall Street has already trimmed expectations for the current quarter to about 7 per cent growth from just over forecasts of 11 per cent at the beginning of the year.

“The hit to growth is more of the commentary that we’ll be looking for from companies,” said Kevin Gordon, senior investment strategist at Charles Schwab.

Concerns about profits follow a series of economic reports with worrisome signals that include US households becoming more pessimistic about inflation and pulling back on spending. Consumer spending has essentially driven US economic growth in the face of high interest rates.

Wall Street has been hoping that the Federal Reserve would continue lowering interest rates in 2025. The central bank has signalled more caution, though, partly because of uncertainty surrounding the economic impact of tariffs. The Fed is expected to hold rates steady at its upcoming meeting later in March.

The Fed raised interest rates to their highest level in two decades in order to tame inflation. It started cutting its benchmark rate in 2024 as the rate of inflation moved closer to its target of 2 per cent. But inflation remains stubbornly just above that target and tariffs threaten price increases that could fuel inflation.

In the bond market, Treasury yields were mixed. The yield on the 10-year Treasury rose to 4.20 per cent from 4.16 per cent late Monday. It’s still down sharply from last month, when it was approaching 4.80 per cent, as worries have grown about where the strength of the US economy.

“Because tariffs are in effect, and there’s no guarantee that they’re likely to be temporary, that’s filtering its way to the bond market and we’re seeing the threat of higher inflation eroding the value of the 10-year note,” said Sam Stovall, chief investment strategist at CFRA.

The yield on the 2-year Treasury held steady at 3.94 per cent.

All told, the S&P 500 fell 71.57 points to 5,778.15. The Dow dropped 670 points to 42,520.99, and the Nasdaq shed 65.03 points to 18,285.16.

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