US pre-open: Futures firmly lower as Trump launches trade war

(Sharecast News) - Wall Street futures were firmly in the red ahead of the bell on Monday following Donald Trump's move to slap multiple key trading partners with tariffs, leading to fears that a full-blown trade war would disrupt supply chains, spark inflation and impact global economic growth. As of 1245 GMT, Dow Jones futures were down 1.35%, while S&P 500 and Nasdaq-100 futures had the indices opening 1.53% and 1.76% weaker, respectively.

The Dow closed 337.47 points lower on Friday following a volatile week for stocks as concerns about a bubble in the US artificial intelligence industry hammered market sentiment.

In focus ahead of the bell on Monday was news that Donald Trump slapped a 25% tariff on goods from Mexico and Canada and also placed a 10% levy on imports from China. Canada responded with retaliatory tariffs of its own, while Mexico declared it would explore levies on US imports. China, on the other hand, vowed to file a lawsuit with the World Trade Organization.

Trump also indicated that the UK and the European Union were next up for a fresh round of tariffs, stating that both were "out of line". While he noted that a deal could possibly be "worked out" with the UK, he stated that EU tariffs "will definitely happen".

Ebury's Matthew Ryan said: "The unveiling of some savage tariffs from the Trump administration over the weekend has wreaked havoc in financial markets. It is perhaps not the size of the trade levies that has caught markets wrong-footed, but both the hastiness at which they will be imposed and the speed of the retaliatory response from authorities in Canada and Mexico. We have on our hands a full-blown trade war and one that, worryingly, may have only just begun.

"There appears to be no economic rationale for these trade restrictions, and the big fear for investors is that these tariffs could act to significantly weaken global growth in 2025. This creates an extremely unpleasant environment for risk assets, and a favourable one for the dollar, particularly given the growing threat of higher Federal Reserve rates for longer."

The yield on the benchmark 10-year Treasury note was down more than three basis points ahead of the open at 4.507%, while West Texas Intermediate futures were 2.59% higher at $74.41 a barrel and the ICE US dollar index was 0.74% stronger at 109.18.

On the macro front, S&P Global's January manufacturing PMI was slated for release at 1445 GMT, while the Institute of Supply Management's manufacturing PMI and December construction spending figures will follow at 1500 GMT.

In the corporate space, Alphabet, Amazon and Disney will all report earnings before the end of the week.

Reporting by Iain Gilbert at Sharecast.com