Stocks absolutely hate specifics on tariffs

The stock market was doing reasonably well dealing with the idea of tariffs, in theory. But once President Donald Trump revealed specific nation-by-nation reciprocal tariff rates, which include 20% on imports from the EU and 34% on goods from China, major US index ETFs completely fell out of bed.

The SPDR S&P 500 Trust and Invesco QQQ Trust finished the regular trading day up about 0.7%. They’ve cratered in after-hours trading to fall as low as 1.8% and 2.6% below Monday’s closing price, respectively.

The president framed these levies as “tough love” designed to ensure a level trading playing field and ultimately boost US manufacturing.

The US stock market’s drawdown from all-time highs since February 19 has been much more a function of beaten-down AI momentum names than a levelheaded downgrading of Corporate America’s earnings power due to the higher costs associated with trade frictions. If anything, price action had suggested that investors were looking to call a bottom in tariff-sensitive names, thinking these presidential actions wouldn’t be too much of a headwind. Heading into this event, a Goldman Sachs basket of companies most vulnerable to tariffs was up 3.6% so far this week, which would have been its largest weekly advance since September.

“It’s surprising stocks are not down even more,” said Neil Dutta, head of US economics at Renaissance Macro Research. “Perhaps investors assume cooler heads prevail later. I would not hold your breath.”