CNBC Daily Open: Tariff fears wipe off election gains, ignite stagflation worries

U.S. President Donald Trump’s 25% tariffs on Canada and Mexico, and an additional 10% on China, are officially in place, proving that he wasn’t brandishing them merely as a negotiating tactic, as many had thought — and hoped. Canada and China have since announced retaliatory tariffs, while Mexico said its response will come Sunday.

Geopolitical trade and international relations may be fractured by the U.S., but it could be domestic consumers and the economy that hurt the most. Business leaders in shipping and retail — two industries that serve as bellwethers of the economy — expressed concerns that the tariffs could raise prices, even within days.

Over in markets, investors were likewise spooked. All major U.S. benchmarks slumped. Gains made by the S&P 500 as it rode the victory wave of Trump’s victory on Election Day have now vanished. Tech stocks have been battered since Trump’s inauguration in January. The tax on imported goods from other countries is starting to look like one on stocks too.

Compromise on tariffs?
U.S. President Donald Trump’s 25% tariffs on goods imported from Canada and Mexico, as well as an additional 10% levy on China, kicked in midnight on Tuesday. U.S. Commerce Secretary Howard Lutnick said Tuesday that Trump will “probably” announce tariff compromise deals with Canada and Mexico as soon as Wednesday. In a speech before Congress on Tuesday, Trump said his tariffs will cause “a little disturbance, but we’re OK with that.”

China targets economic growth of “around 5%”
China is targeting a gross domestic product growth target of “around 5%” for 2025, according to Beijing’s official report. The world’s second-largest economy also raised its budget deficit target to “around 4%” of GDP from 3% last year, which is the highest fiscal deficit on record going back to 2010, according to data accessed via Wind Information. The move, among other stimulus measures announced Wednesday, marks a meaningful shift in Beijing’s policy as it attempts to tackle a sluggish economy.

Price increases likely, businesses say
Trump’s tariffs could push up prices in days, business leaders said. “The short-term effect of any tariff clearly is inflation,” said Charles van der Steene, president of North America for shipping giant Maersk, while Target CEO Brian Cornell told CNBC on Tuesday “the consumer will likely see price increases over the next couple of days.” This is causing fears of “stagflation” in the U.S. economy, in which prices rise but growth slows.

U.S. markets slump on tariff fears
Investors sold off U.S. stocks Tuesday, spooked by the tariffs’ effects on the economy. The S&P 500 lost 1.22%, the Dow Jones Industrial Average dropped 1.55% and the Nasdaq Composite retreated 0.35%. China’s CSI 300 climbed 0.42% as investors assess news from the country’s parliamentary gatherings. Australia’s S&P/ASX 200, however, fell 0.77% even as the country’s fourth-quarter GDP expanded 1.3% year on year, beating expectations.

‘Trump bump’ election gains wiped out
The “Trump bump” in markets has disappeared. After tumbling on Tuesday, the S&P 500 closed at 5,778.15, below the 5,782.76 level on Election Day, Nov. 5. This means the index has lost its post-election gains. The Russell 2000 index of small caps, which jumped 5.84% on Nov. 6, is down about 8%. Meanwhile, technology stocks have slumped more than 7% since Trump took office in January.

[PRO] Look to Europe for equity: analysts
Europe is the place to be for equity investors, according to analysts who flagged rising valuations and political risk in the U.S. market as drawbacks when compared to Europe’s more stable geopolitical environment. Europe’s market and economy also offer several other advantages over that of the U.S.

K-pop stocks defy South Korea’s political and economic woes — as well as Trump tariff threats

South Korea’s economy has been slowing, with growth hitting a multi-quarter low. Its currency has been under pressure, and the country is in political turmoil. U.S. President Donald Trump’s tariff threats have not made things easier. But there is one sector that has offered hope to investors this year: K-pop, one of South Korea’s largest cultural exports.

Shares of the four major K-pop companies have gained between 20% and 33% so far this year, outperforming the Kospi’s 5.39% gain and the Kosdaq’s 8.8% rise, as of March 4. Hybe, JYP and YG have also hit new 52-week highs this year. One reason why investors are turning to K-pop stocks is that the sector does not face the risk of U.S. tariffs, Shinhan Securities analyst Ji In-hae wrote last month, according to a Google translation of her note in Korean.