News

This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:

The initial market shock of Trump slapping new tariffs on Mexico and Canada led to the full erasure of the post-election Trump bump on Tuesday.

Of course, it wasn't without some drama that saw the S&P 500 ( ^GSPC ) in the green at times before closing down 1.2%. The shifts of Tuesday’s stock charts staged their own dramatic reenactment, in miniature, of the uncertainty swirling around Trump’s decisions.

But amid retaliatory tariffs and warnings from businesses about the squeeze of forceful levies, it seems clear that Wall Street is delivering its own resounding judgment on Trump’s economic actions.

Investors accelerated the sell-off Tuesday, hurling the Nasdaq ( ^IXIC ) toward correction territory while counter-tariffs from the targeted nations came volleying back.

Canada unveiled plans to impose 25% duties on billions of dollars of US imports, with Prime Minister Justin Trudeau framing Trump’s move as a kind of declaration of economic warfare. Mexico implemented 25% tariffs on US goods. And China answered with duties up to 15% targeting US farmers .

After the market close on Tuesday, Trump's Commerce Secretary Howard Lutnick floated the possibility of relief for Canada and Mexico as soon as Wednesday. In response, US stock futures perked up slightly.

In a speech before Congress Tuesday night, however, the president did not sound like someone ready to make a deal.

For American business leaders delighted about Trump’s second term, the tariffs might feel like a fleeting headache. Next to tax cuts and more lenient regulations, sure, the levies are an unsavory part of the equation . But they’ll still be better off under Trump’s broader economic plan when all is said and done.

The White House is acting as if this is all going according to plan. Perhaps the metaphor is a pawn sacrifice. The country must suffer through short-term pain for long-term advantage.

But the further splintering of global trade and the alienation of US allies can unleash some long-term challenges too. As Neil Shearing of Capital Economics wrote in a note Tuesday, the Trump tariffs risk widening a fissure within the group of nations largely aligned with Washington, complicating collective action against an emboldened Beijing and further isolating the US on the global stage.

Back at home, it's hard to see what's happening in markets as anything other than the beginning of a domestic referendum on Trump's economic agenda. Sure, the stock market isn't the economy. And as this newsletter mentioned last week, Trump's economic advisers are eyeing other indicators to gauge their success . But if the numbers go down far enough and abstract displeasure becomes tangible consumer pain, there will be a response.