The unseasonably cold snap blasting much of North America is delaying the spring DIY sales boost toolmaker Stanley Black & Decker typically enjoys about this time of year.
But the Connecticut-based maker of power screwdrivers to lawnmowers felt a harsher chill from Washington last week when Donald Trump unleashed tariffs on the rest of the world.
Stanley Black & Decker may be better able to deal with the rapidly escalating trade war between the US and China than it would have been under Trump’s first presidency.
“Seven, eight years ago, about 40 per cent of what we sold in the US came from China. And now we’re down to a number that’s closer to the mid-teens,” chief executive Don Allan told analysts on a call in January.
It didn’t stop the company’s shares sliding 29 per cent over the course of 4½ days of trading following Trump’s April 2nd ‘Liberation Day’ speech. It made the toolmaker one of the worst affected stocks on the S&P 500 index as a violent wider market reaction wiped trillions off the value of shares globally and triggered gyrations across other financial markets.
That was before the US president sensationally announced during lunchtime trading in New York on Wednesday (just after 6pm Irish time) that he would be putting a 90-day pause on most tariffs.
Even though he has doubled down on China – levies on imports from there would rise to 125 per cent from 104 per cent after Beijing unveiled additional retaliatory charges earlier in the day – Stanley Black & Decker would not be denied participating in the biggest one-day Wall Street rebound since October 2008, jumping 15 per cent as the wider US market soared 9.5 per cent.
[ White House says tariffs on China now total 145%Opens in new window ]
While the relief rally spilled over into Asia and Europe on Thursday, selling pressure resumed as trading got under way again on Wall Street as markets waited for Trump’s next move.
The market reaction seen for most of the past 10 days was “very different to anything we’d seen before”, said Aidan Donnelly, head of equities at Davy Private Clients. “Unlike, say, the financial crisis or Covid, this was self-inflicted.”
Elliot Hentov, head of macro policy research at State Street Global Advisors, said stocks “would now require another positive trigger to take another leg up, while policy uncertainty continues to dominate market moves in coming weeks”.
“The residual unknown would relate to whether US-China trade relations could improve within a reasonable time frame,” he said.
The about-turn proved that Trump pays attention to the markets. But while the S&P 500 is usually the 78-year-old’s barometer of choice, it was the bond market that forced him to blink first in his game of chicken with what he had called “foreign scavengers”.
Investors had initially piled into US government bonds – a traditional safe haven in times of market volatility – in the immediate aftermath of last week’s tariffs speech, sending the market interest rate – or yield – on its 10-year notes from about 4.2 per cent to below 4 per cent.
However, the yield – which drives not only government borrowing costs but influences rates on new mortgages, credit card debt and business loans – spiked in the first three days of this week to as high as 4.5 per cent. This was an unusual move at a time when recession fears are mounting. It triggered a number of theories, ranging from investors dashing for cash to hedge funds being forced to sell to meet margin calls, and speculation that Chinese and Japanese investors – among the largest holders of US debt and worst impacted by Trump’s protectionist measures – were dumping US government bonds.
Trump, who vowed over the weekend to maintain his hard line against the country’s trading partners even after stocks tanked, acknowledged on Wednesday evening the flashpoint that had spooked him most.
“The bond market is very tricky, I was watching it,” he told reporters. “I saw last night where people were getting a little queasy.” His government needs to refinance trillions of dollars of debt in the next 12 months.
The announcement of the 90-day moratorium suggests markets can probably eliminate worst-case scenarios, according to Barry Glavin, the Dublin-based head of global equities at Amundi, Europe’s largest asset manager.
“However, it also means that uncertainty will continue throughout this period,” he said. “It remains unclear what a steady-state looks like in terms of the tariff regime the US will stick with. It also remains to be seen what retaliatory measures will be implemented.”
Trump’s major reversal will see tariffs on nations that don’t retaliate against the US drop to 10 per cent, which aligns with his blanket tariff level on all imports. Before this, most imports from the EU were facing a 20 per cent charge. EU member states had only approved 25 per cent counter-tariffs on a wide range of US products earlier on Wednesday, including poultry, soyabeans and steel. These were suspended on Thursday.
The seven days that followed Trump whipping out his tariffs chart in the White House Rose Garden saw shares globally – measured by the MSCI World Index – slumping more than 11 per cent and Wall Street’s gauge of market fear, the Vix index, spiking at levels last seen five years ago during the height of the Covid panic.
Banking stocks bore the brunt of the sell-off in Ireland – with Bank of Ireland, AIB and PTSB sliding between 14 and 18 per cent, amid concerns about the fallout on Ireland’s open economy. Only hours before his volte-face, Trump was threatening to soon announce “major” tariffs on imported pharmaceuticals, which make up 60 per cent of Irish goods shipments across the Atlantic.
In Dublin, too, the Central Bank upped its surveillance of Irish-domiciled funds holding €4.9 trillion of assets, making it the second-largest funds hub in Europe.
[ EU hits pause on counter-tariffs in hope of US trade dealOpens in new window ]
“Approximately €2.1 billion, or circa 43 per cent, of the total net assets of Irish domiciled investment funds are invested in global equities. The Central Bank has been closely monitoring data flows and engaging directly with various market participants in recent days, as is standard at times of heightened market volatility,” a spokeswoman for the regulator said. “We cannot comment on individual firms or the specifics of our supervisory engagements, but we continue to monitor for indicators of stress.”
Over the seven days, the price of crude oil plunged by more than a fifth to less than $56 a barrel on recession fears; gold, a traditional go-to for investors in times of uncertainty, hit an all-time high of almost $3,168 an ounce before falling almost 7 per cent; and the premium that investors demand to hold debt of companies with low credit ratings, or junk bonds, spiralled at their fastest pace, relative to government debt, since the US regional banking crisis in March 2023. The cost of investors insuring against companies and sovereigns defaulting on debt on the credit default swaps market also moved higher.
The turbulence was compounded by mixed messaging on the ultimate aim of the tariffs regime, with Trump and his treasury secretary Scott Bessent suggesting it would yield trade deals, while his top adviser on trade and manufacturing, Peter Navarro, insisted there was no room for negotiation.
Dissent also crept into the upper echelons of Trump’s Make America Great Again movement.
Elon Musk, head of Tesla and SpaceX, and Trump sidekick, distanced himself from the plan over the weekend when he suggested the US should enter a free-trade zone with Europe. He subsequently entered into a bitter public spat with Navarro, calling the protectionist former economics professor “a moron”.
Billionaire hedge fund manager Bill Ackman, a vocal backer of Trump’s presidential bid last year, urged the president to pause the tariffs, or risk “a self-induced, economic nuclear winter”.
Ken Fisher, founder of Fisher Investments and a longtime Trump supporter since the 2016 campaign, went even further. He took to X on Tuesday to say the tariffs were “stupid, wrong, arrogantly extreme, ignorant trade-wise and addressing a non-problem with misguided tools”.
Musk and the other six CEOs of the so-called Magnificent Seven companies that had led the wider market higher in recent years – including Apple’s Tim Cook, Amazon’s Jeff Bezos and Meta boss Mark Zuckerberg, all flag wavers at Trump’s inauguration in January – saw tens of billions wiped off their combined net wealth as the values of their companies fell.
“Speedy ‘deal’ announcements over the coming 4-6 weeks would be the most favourable (or least negative) outcome for equity markets, in our view, and remain our base case,” said Deutsche Bank equity strategists, led by Maximilian Uleer, in a report published even before Trump announced his U-turn.
If the US had stuck to the tariffs announced last week, Deutsche reckons it would have shaved as much as 1.5 percentage points off US gross domestic product (GDP) expansion this year – suggesting the economy would barely grow. It would only have been a matter of time before equity markets priced in a potential recession in Europe, too, they said.
There is a threat that the US will return to its original tariffs plan once the 90-day pause is over, even though Trump – who sees himself as the ultimate dealmaker – has significantly weakened his hand by caving in to market forces. For now, a unilateral 10 per cent charge on most imports remains.
“Right now, we don’t know who will pay for them,” said Ipek Ozkardeskava, a senior analyst at Swissquote Bank. “Will exporters absorb the majority of the costs to protect their US market share? Or will exporters pass on the costs to US consumers?”
Investors will be closely monitoring commentary from US companies as the first-quarter earnings season kicks off on Friday with banking giants JP Morgan, Morgan Stanley and Wells Fargo and investment group BlackRock reporting results and hosting analyst calls.
While Davy’s Donnelly says market volatility may be the order of the day for the near term, he notes that investors with a long-term perspective have historically been well rewarded.
The MSCI World Index’s 13 per cent decline so far this year compares to an almost 19 per cent advance over the course of 2024. The index is up by about 50 per cent from where it stood at the end of 2019.
“In that period we’ve had a global pandemic, a massive swing in global interest rates and a trade dispute, and yet equities are up sharply,” said Donnelly. “If you were to be shown a chart in five years’ time depicting the performance of the stock market over 10 years, you probably wouldn’t be able to pick out [the current episode].”
