News

What Happened?

Shares of clothing and accessories retailer Gap (NYSE:GAP) fell 22.2% in the morning session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.

From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.

The shares closed the day at $17.82, down 20.4% from previous close.

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What The Market Is Telling Us

Gap’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Gap and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 10 days ago when the stock gained 8.3% on the news that stocks rebounded (Nasdaq +2.0%, S&P 500 +1.5%) following a report from The Wall Street Journal stating that the Trump administration's reciprocal tariffs, to be announced on April 2, 2025, would be more narrowly targeted. The market reaction indicated that investors took that as a sign the economic impact of the tariffs, particularly on inflation and growth, might not be as bad as they initially feared. That's a bit of a relief, which likely gave businesses and analysts some space to rethink their outlooks. Earlier, the administration had hinted at much broader tariffs that could have hit any country placing duties on U.S. imports, so this shift was likely a welcome surprise for the market.

Gap is down 24% since the beginning of the year, and at $17.95 per share, it is trading 38.2% below its 52-week high of $29.03 from June 2024. Investors who bought $1,000 worth of Gap’s shares 5 years ago would now be looking at an investment worth $3,177.

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