US Stocks Likely to Open Lower Amid Tariff Tensions: Expert Warns of Market Stagnation Without Lower Tariffs

As the US-China trade war escalates, with new tariffs on the horizon, investors are bracing for a potential market downturn. The S&P 500 Index, which had been on a tear in recent months, is expected to open lower on Monday, according to experts. The new tariffs, which target goods from Canada, Mexico, and China, have sparked concerns about supply chain disruptions, increased production costs, and overall market volatility.



"With the current tariff situation, it's hard to see the market going up," said Shaul Eyal, a top-rated analyst at TD Cowen, in an interview with CNBC. Eyal, who ranks among the top 10 analysts on Wall Street, according to TipRanks, believes that the new tariffs could weigh on the market, particularly in sectors such as technology, manufacturing, and consumer goods.

Goldman Sachs Research estimates that if sustained, the US tariffs recently considered would reduce S&P 500 earnings per share by roughly 2-3%. The firm's chief US equity strategist, David Kostin, writes that every five-percentage-point increase in the US tariff rate is estimated to reduce S&P 500 earnings per share by roughly 1-2%. This suggests that the new tariffs could have a significant impact on corporate earnings and, consequently, stock prices.

Investors should be prepared for increased market volatility as trade tensions evolve. Some strategies to consider include:

1. Diversification: Reducing exposure to sectors most affected by tariffs and focusing on resilient industries.
2. Monitoring Economic Data: Watching for key reports on inflation, GDP growth, and corporate earnings to gauge potential market shifts.
3. Hedging Strategies: Using options or sector rotation strategies to manage risks associated with trade-related market swings.

While the market may experience short-term headwinds due to tariffs, history has shown that protectionist measures have not necessarily served as a long-term hurdle for the stock market. Once markets grow accustomed to tariffs and a resolution is reached, volatility may ease, and financial markets could reaccelerate. However, investors should stay informed, adapt strategies, and closely watch geopolitical developments for signs of further escalation or resolution.

In conclusion, the ongoing US tariffs on goods from Canada, Mexico, and China, as well as the potential retaliatory measures, are reshaping the stock market landscape. While certain industries face challenges, others may find opportunities in shifting global trade patterns. Investors should stay informed, adapt strategies, and closely watch geopolitical developments to navigate the volatile market environment.