March Economic Update
Market Summary
The market action last month in February was almost entirely dominated by the Trump administration’s actions, and in actions, regarding implementing tariffs on Mexico, Canada, and China. To a lesser extent, there was some focus on weakening economic data including softening home sales, persistent inflation, lackluster jobs numbers, and several S&P 500 companies projecting a weaker consumer demand as we head into the spring and summer months. As was largely expected, price volatility persisted through February with S&P 500 netting the month down -1.42%, the tech-driven Nasdaq 100 retreating -2.76%, and the small cap Russell 2000 pulling back -5.45%. (1)
Tariff Talk
After delaying new tariffs for one month, President Trump threatened to implement 25% tariffs on all imports from Mexico and Canada beginning on March 4th. Only a couple days later, the President announced that he would walk back some of these tariffs – namely excluding imports named under the rules of the USMCA, or the U.S.-Mexico-Canada Agreement. The exclusions total roughly half of the total imports from Mexico and around 38% of imported goods from Canada. There is also a temporary suspension for all automobile imports for the next 30 days.
The President has also made it clear that he is planning more tariffs to be announced in April which will likely include “retaliatory” tariffs to countries which already add a Value Added Tax (VAT) to imported goods from the United States which is substantially similar to conventional tariffs. These include numerous European countries as well as India.
It’s fairly evident to most analysts and experts that Trump doesn’t want to back down from these tariff threats entirely to maintain his negotiating power. However, at the same time, it appears that both the President of Mexico and Prime Minister of Canada are using these same tactics themselves by threatening US export tariffs which would match the same 25% amount proposed by President Trump. If all tariffs were enacted by all sides, it would be a large economic deterrence for all sides involved. (2)
In addition to everything above, President Trump implemented another 10% tariff on all Chinese imports into the United States, with China’s president Xi Jinping vowing retaliatory tariffs will be coming for US exports to China. (3)
All of these developments are changing day-by-day and we do expect more price volatility to come – both up and down – over the next month or two while these tariff negotiations play out.
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Monthly Financial Tip:
Simplify things for your tax preparer or CPA by organizing your financial records into three categories: income statements, expenses and deductions, and investments.
Citations:
1. Charles Schwab, February 28, 2025
2. NBC News, March 06, 2025
3. Washington Post; March 04, 2025
Disclaimers:
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
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