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TThe three major US stock indices rallied on Tuesday afternoon, recovering most of their losses in an earlier rout triggered by warnings from Caterpillar and 3M, two of the largest US manufacturers, that the trade war President Trump raised the cost of supply.
Caterpillar, which manufactures heavy equipment used in agriculture and road works, said that tariffs on steel, aluminum and Chinese imports rising to 250 billion dollars cost the company an additional $ 40 million over the next three months of September. Expenses could reduce profits by $ 100 million or more for the full year of 2018, the executives warned.
Shares of the company based in Deerfield, Illinois, then fell 10% to 115.84 dollars in New York, helping to bring down the Dow Jones industrial average by more than 500 points before reduce losses.
The S & P 500 as a whole fell by 1.9% and the technology-rich Nasdaq by 2.3%. The president says tariffs are needed to eliminate trade imbalances and bring manufacturing jobs back to the United States.
At the beginning of the afternoon, the daily decline of the Dow had been reduced to 0.5% and that of the S & P 500 and Nasdaq had been reduced to 0.6% and 0.4%, respectively.
"Although our US outlook is positive, recent performance shows that the group is not immune to divestments," said Mark Haefele, chief investment officer at UBS Global Wealth Management. "Fund managers are watching over the risk that an overheating economy and rising interest rates will sound the death knell of a long-standing bull market," he said. added, but "we think it's still too early to call."
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Although many companies downplayed the impact of tariffs in the spring, offsetting price increases, economists said the tactic was going to get tougher as more fees came into effect.
3M, a Minneapolis-based company considered by economists as a model because of the breadth of its products, said that customs-related spending would yield 15 cents a share of this year's earnings and perhaps more 2019.
"We expect a continued rise in commodity prices," said Nick Gangestad, 3M's chief financial officer, during a call for profit. "If I rush a bit in 2019, we think the rates will have a negative impact on our total supply cost.We are of the opinion that we have an obstacle of about 100 million dollars. due to tariffs and that our prices will be more than offset by this and the price of the material increases in 2019. "
The decline in the 3M stock market was reduced to 3.9% at the close of trading Tuesday, with shares at $ 193.50, but not until Trump turned to Twitter to reassure voters that his business strategy would pay off in the long run.
"If a country does not give us a fair trade agreement, we will impose tariffs on it," he said. "Used or not, jobs and businesses will be created."
Billions of dollars go and go into the coffers of the United States because of tariffs. Also ideal for negotiations – if a country does not give us a fair trade agreement, we will introduce tariffs on them. Used or not, jobs and businesses will be created. The United States is once again respected!
– Donald J. Trump (@realDonaldTrump)
October 23, 2018
While business leaders opposed Trump's commercial strategy, with the US Chamber of Commerce launching a strong marketing campaign against tariffs, JPMorgan Chase CEO Jamie Dimon acknowledged earlier this month that they seemed to have proven to be an effective bargaining tool.
The president himself said the same thing at a press conference held in early October to promote revisions to the North American Free Trade Agreement, which would increase state access. Markets and ensure a greater concentration of automotive manufacturing in the region.
"Without tariffs, we would not talk about an agreement, but only for babies who continue to talk about tariffs," Trump said. "This includes Congress -" Oh, please, do not charge rates. "Without tariffs, you would not be – we would not be here."
Trump is unlikely to change his mind, regardless of the outcome of the midterm elections, said Chris Krueger, an analyst at the Cowen Washington Research Group, who has followed federal policy over the past four decades.
If the Republicans retain control of both houses of Congress, the president will consider himself validated and will bow down, Krueger said. If the Democrats win power, the president can blame the Republicans who opposed it.
The main goal of the White House "is to break global supply chains and bring manufacturing and production back home," he added. "This is centered around the melancholy Trumpian vision of a 1950s America".
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