DeepSeek and Potential Trade War Weigh on Markets

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Jeff Cox of CNBC reports Trump tariffs on Canada, Mexico and China begin Saturday, White House says:

In an apparent ending to weeks of intense speculation, the White House confirmed Friday that President Donald Trump will be leveling aggressive tariffs this weekend on major U.S. trading partners.

Karoline Leavitt, the White House press secretary, said Trump will be implementing 25% tariffs on Mexico and Canada as well as a 10% duty on China, in retaliation for “the illegal fentanyl that they have sourced and allowed to distribute into our country.”

The White House provided few details on exactly how the levies will be meted out, saying that they will be available for public inspection at some point Saturday.

The news sent the Dow Jones Industrial Average down more than 300 points, or about 0.7%. The S&P 500 and Nasdaq Composite both turned in losses as well. All three major benchmarks were up solidly earlier in the day.

“These are promises made and promises kept by the president,” Leavitt said.

There was no word on potential exemptions to the tariffs; the White House denied an earlier Reuters report that there would be at least some exclusions rather than simply blanket measures covering all products, and that the tariffs would be delayed until March 1.

Together, the U.S. does about $1.6 trillion in annual business with the three countries. Trump is seeking to use the tariffs as both bargaining chips and methods to effect foreign policy changes, specifically the immigration and drug trade issues.

“We’ve got the Super Bowl coming up, and eerily, the amount of people that fit in the [New Orleans] Superdome are almost exactly equal to the number of people dying every year here in America from fentanyl, and that comes from China and Mexico,” Trump trade advisor Peter Navarro told CNBC in an interview earlier Friday. “This is why we have these kind of discussions.”

Economists worry that the tariffs could reignite inflation at a time when it appears price pressures are beginning to abate. The Commerce Department reported Friday that an inflation reading closely watched by the Federal Reserve rose to 2.6% in December, but the details in the report appeared more positive.

However, Fed officials have said they are monitoring the impact of fiscal policy.

“It will be very important to have a better sense of the actual policies and how they will be implemented, in addition to greater confidence about how the economy will respond,” Fed Governor Michelle Bowman said.

Speaking to CNBC on Friday morning, Chicago Fed President Austan Goolsbee said the key will be whether the tariffs are one-off events or lead to retaliation.

Lisa Kailai Han and Alex Harring of CNBC also report Dow closes 300 points lower Friday as White House says tariffs will start Saturday:

The S&P 500 slid Friday following news that President Donald Trump’s aggressive tariffs against major U.S. trading partners would begin on Saturday.

The broad market index shed 0.50% to close at 6,040.53, while the Dow Jones Industrial Average tumbled 337.47 points, or 0.75%, weighed down by a decline in Chevron. The 30-stock Dow ended the session at 44,544.66. The tech-heavy Nasdaq Composite slipped 0.28% to 19,627.44.

Stocks gave up their earlier gains after White House press secretary Karoline Leavitt announced on Friday afternoon that the president’s tariffs will be available for public inspection at some point Saturday. Trump will be leveling 25% tariffs on Canada and Mexico, alongside a 10% duty on China. At its session highs, the blue-chip Dow had risen more than 170 points. Stocks with exposure to these markets reacted such as Corona brewer Constellation Brands and Mexican food chain Chipotle, which respectively shed nearly 2% and 1% upon the news.

“This is very similar to what we saw on Monday, with DeepSeek, right? So there was the news; the first reaction was to sell,” said Tom Hainlin, senior investment strategist at U.S. Bank Asset Management Group. “There’s the initial reaction to the headlines about tariffs. We have no details about them. We have no details about the percent, whether they’re temporary or permanent, what reaction you might get from Canada or Mexico or China. Our perspective is we’ll wait, and find out when the actual policy is implemented.”

Investors also honed in on Apple, which exceeded fiscal first-quarter expectations. While Apple reported disappointing sales tied to the iPhone, services revenue appeared to take the spotlight. The stock ended the session 0.7% lower. Shares of Chevron and Exxon Mobil respectively dipped 4.6% and 2.5% on the back of disappointing fourth-quarter results.

Friday’s action follows a winning — but volatile — trading session for the three major indexes. Technology has been a major focus of investors this week given Monday’s big sell-off sparked by developments out of China’s DeepSeek artificial intelligence startup and earnings reports from key players over recent days.

“I thought that that huge sell off was overdone,” said Jay Hatfield, CEO of Infrastructure Capital Advisors. “The DeepSeek freak is fading. We think it’ll fade further with Amazon and Google reporting next week, and of course, Nvidia later. We’re optimistic on that.”

After tumbling 3.07% on Monday, the Nasdaq Composite ended Friday with a weekly loss of 1.6%. The S&P 500 and blue-chip Dow finishing the week 1% lower and 0.3% higher, respectively. Nvidia, which plunged nearly 17% on Monday, posted a weekly loss of roughly 16%.

Friday also marks the last day of what has been a rocky January for traders. Nevertheless, the three major averages posted monthly gains, with the S&P 500 rising 2.7% and the Nasdaq advancing 1.6%. The Dow outperformed in the period, jumping 4.7%.

“We still do have a fair amount of earnings,” Hatfield added. “Usually, it pays to be long during earnings, so we would continue to be bullish into February.”

Friday’s release of the December data for the personal consumption expenditures price index — the Federal Reserve’s preferred inflation gauge — showed an increase of 0.3% from November and a 2.6% annual rate. While this yearly advance was in line with economists’ expectations, it marked an acceleration from the prior month’s rate of 2.4% — raising some concerns that inflation remains sticky. Excluding food and energy, core PCE also increased 0.2% monthly and 2.8% on an annual basis.

Another volatile week on Wall Street beginning with DeepSeek roiling markets on Monday, some decent earnings from some of the big tech names lifting them and then this afternoon, the official announcement that tariffs take effect tomorrow sent risk assets down again.

Adding to the angst, it seems that Ottawa and most of the provinces are preparing a strong response to US tariffs:

Amazingly, instead of announcing a massive investment in securing our border, our politicians want to go tit-for-tat with Trump on tariffs. No wonder the loonie is sinking close to its lowest levels since the GFC:

Now, truth be told, tariffs are inflationary, if inflation and rates start climbing fast in the US, Trump and his administration will be in deep trouble. 

We are far from there however.

Still, the stock market obviously doesn't like tariffs or the prospect of a global trade war, it adds to uncertainty and many investors will sell first and ask questions later, similar to what happened on Monday with DeepSeek revelations.

We will see what next week brings but here were the best and worst performing large cap stocks in the US stock market this week (from barchart.com):

Below, Tae Kim, author of ‘The Nvidia Way,' joins CNBC's 'The Exchange' to discuss outlooks on DeepSeek, Nvidia, and more.

Next, Steve Weiss, Founder and Managing Partner of Short Hills Capital Partners joins CNBC’s “Halftime Report” to explain why he's buying more Nvidia after the stock fell 11% this week.

Third, Black Swan author Nassim Taleb says the plunge in Nvidia shares could portend more losses ahead. He likens the chipmaker's dominance in artificial intelligence to AltaVista's dominance in web browsing three decades ago.

Fourth, There are fears of a major global trade war after President Trump announced sweeping tariffs on imports from Canada, Mexico and China starting immediately. He added that 'very substantial tariffs' would follow for the European Union. ane Hill presents BBC News at Ten reporting by Sarah Smith in Washington and Laura Bicker in Cambodia.

Lastly, RBC senior VP and chief economist Frances Donald explains how a potential trade war could impact the Canadian and U.S. central banks.

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