The latest Market Talks covering U.S. politics. Published exclusively on Dow Jones Newswires throughout the day.

1108 ET - Big technology companies aren't immune to U.S. tariffs, Quilter Cheviot analyst Ben Barringer writes in a note. Apple makes 90% of its products in China, with 10% in other Asian countries such as Vietnam and India. "These countries are facing the harshest tariffs, so we can expect iPhones and Apple Watches to go up in price, while hitting the profits of the company significantly," Barringer says. The tariffs are also likely to lead to cutbacks on software and cloud spending. "Alphabet will see a double whammy with digital advertising also cut back on in a tougher economic environment--with Meta also being hit in this regard," he adds. Apple, Meta Platforms and Alphabet shares are down 8.6%, 8% and 3.9% respectively. (najat.kantouar@wsj.com)

1056 ET - Tariffs will be a headwind to U.S. economic growth, but a slowdown is more likely than a contraction, Comerica's Bill Adams says. He says the impact from tariffs will be partially offset by tax cuts under discussion in Congress. He thinks overall fiscal policy through 2026 "is going to be more supportive of growth than financial markets are pricing in." Much will also depend on whether tariffs are seen as permanent or something that could go away depending on negotiations with U.S. trade partners, Adams says. The real economic risk "is if other countries start imitating the U.S. in raising tariffs." (paulo.trevisani@wsj.com; @ptrevisani)

1052 ET - Chair Powell has a speech tomorrow and he is likely to "signal the Fed is interpreting the effect of tariffs cautiously and is going to wait for more information," before cutting interest rates, Comerica's Bill Adams says. "The Fed will probably see higher tariffs as a reason against cutting," in the near term, he says. Officials projected two cuts this year, in March. Adams sees the Fed rushing to cut only if unemployment rises closer to 5%, up from 4.1% in February's payrolls. "If the job market weakens modestly, but inflation goes back above 4%, it will become a lot harder for the Fed to justify cuts." (paulo.trevisani@wsj.com; @ptrevisani)

1052 ET - Trump's tariff hikes announced yesterday could cause deep changes on price and economic indicators, but March inflation gauges will already show some impact from trade policies, Comerica's Bill Adams says. "There was a rush to buy cars…as consumers tried to front-run the tariffs," likely pushing car prices higher, he says. "And for producer prices, commodity markets were already pricing in a significant increase in tariffs…which will likely show up in higher prices of steel and lumber and other construction materials." Still, he says that "it will likely take a couple of quarters" for the full impact of tariffs to show up in indicators. "March will be just the beginning." (paulo.trevisani@wsj.com; @ptrevisani)

1048 ET - Trump's tariff increases were larger than expected, triggering a flight for safety in financial markets, Comerica's Bill Adams says. Stocks are down and bond prices are rising, sending yields lower "as investors have been moving out of risk assets like stocks and into risk-free assets like long-term Treasurys," he says. Futures pricing indicates higher odds of interest rate cuts by the Fed, but Adams says the pricing is likely a reflection of higher demand for bonds and not necessarily bets on monetary policy. "The economy would have to deteriorate quite a bit for the Fed to cut rates while inflation is rising in the next 12 months," he says. (paulo.trevisani@wsj.com; @ptrevisani)

1047 ET - New tariffs complicate things for building products players Masco, Fortune Brands Innovations and Ferguson Enterprises. Just under one-third of Masco's direct input costs are sourced out of China, says Jefferies' Philip Ng in a research note. Fortune's cost of goods sold from China dropped to less than 25% from 50% and it saw around $50 million cost increase from tariffs in 2019, while Ferguson's gross margins were not impacted from the last round of Trump's tariffs. Base tariffs at 54% are larger than feared but likely to be negotiated down. "Fortune Brands Innovations, Masco and Ferguson Enterprises historically have shown good pricing power, but the magnitude of the increase could lead to demand destruction," Ng says. Masco and Fortune brands slide 10%, and Ferguson loses 4.5%. (denny.jacob@wsj.com; @pennedbyden)

1037 ET - Big Pharma could mitigate a 20% drug tariff by adjusting their transfer pricing strategy, without shifting any manufacturing to the U.S., Intron Health analysts say in a note. Transfer pricing is a way for companies to shift profits between different parts of their global operations to reduce their overall tax burden. In a scenario where the U.S. corporation tax rate falls to 15% alongside 20% tariffs, Big Pharma profits would remain stable, while U.S. tax revenue would more than double, the analysts say. Low-tax jurisdictions like Ireland would lose out, but would at least retain their manufacturing base in the medium term, they say. (helena.smolak@wsj.com)

1035 ET - The tariff front-running boost to Canadian exports reversed sharply in February, causing the country's trade balance to swing to a C$1.5 billion deficit for the month, CIBC Capital Markets' Katherine Judge says. The result was sharply below the consensus expectation for a C$3.5 billion surplus. The economist anticipates exports will remain under pressure, since while USMCA-tied goods were exempt from tariffs introduced in March businesses in the U.S. appear to have accumulated enough inventory in prior months. Judge says export demand will also be dented for autos, steel and aluminum, and lumber, which are subject to previously announced tariffs, despite Canada escaping the latest round of so-called reciprocal U.S. tariffs. And, she adds, a higher effective tariff rate on U.S. imports as a whole will work to slow U.S. and global growth and will weigh on export demand for Canada ahead. (robb.stewart@wsj.com; @RobbMStewart)

1034 ET - The additional 34% tariff levied on Chinese goods is expected to cut into demand for American soybeans, but the timing of President Trump's announcement means that the impact may not be immediate. "China is out of the market for U.S. beans right now anyway," says Matt Zeller of StoneX in a note, saying that China at this time of year is more interested in procuring Brazilian soybeans, as Brazil's harvest of its soybean crop nears its end. But once U.S. farmers plant their soybeans this spring, they may see diminished interest from China--but not a complete absence of demand. "They will need to come back at some point for some of the 2025 crop," says Zeller. CBOT soybeans are down 1.5%.(kirk.maltais@wsj.com)

1031 ET - Lululemon's margins could see a roughly 7% headwind with no response to the latest tariffs, William Blair's Sharon Zackfia says in a research note. The bulk of the athletic-apparel company's products are sourced from countries set to be targeted with outsized tariffs put forth by President Trump. The analyst estimates the subsequent blended tariff rate for Lululemon's products at roughly 39%. "With just over 60% of sales in the US and an assumed 70% merchandise margin, the implied unmitigated tariff headwind to margins at over 700 basis points," says Zackfia. "While Lululemon's margins are strong enough to fully absorb the impact, we expect mitigation efforts will somewhat blunt the penalty to Lululemon's bottom line." Lululemon slides 13% to $246.01, part of the broader Wall Street selloff. (denny.jacob@wsj.com; @pennedbyden)

1014 ET - Canada's surprise swing to a trade deficit in February is a harbinger of the extremely volatile trade and other related data that can be expected over the next few months as firms adjust and adapt to the tariff regime the U.S. has put in place, says BMO Economics' Benjamin Reitzes. Canada's exports plunged 5.5% on-month, with declines across the board by product and to most countries, the strategist notes. And volumes weren't any better, falling 4.6% to fully retrace January's surge and then some, he says. Reitzes adds that assuming export volumes don't rebound in March, trade could weigh on 1Q GDP. (robb.stewart@wsj.com; @RobbMStewart)

1011 ET - Grain traders are processing what President Trump's tariff announcements will mean, but the results are so far mixed. "China is a major importer of US soybeans and while their buying tends to shift to Brazil at this time of year, demand going forward could be heavily impacted," says Tomm Pfitzenmaier of Summit Commodity Brokerage in a note. Meanwhile, allowances for USMCA-compliant goods from Canada and Mexico are being taken as a positive for U.S. corn export demand, Pfitzenmaier adds. Most-active CBOT corn is down 0.7%, soybeans fall 1.9%, and wheat slides 1.2%. (kirk.maltais@wsj.com)

(END) Dow Jones Newswires

April 03, 2025 11:08 ET (15:08 GMT)

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