By Johann M Cherian and Sukriti Gupta
(Reuters) -U.S. stock index futures were flat on Tuesday following a selloff on Wall Street in the previous session when President Donald Trump imposed tariffs on trade partners that could intensify a growth-denting global trade war.
At 7:00 a.m. ET, Dow E-minis were down 46 points, or 0.11%, S&P 500 E-minis were down 5.75 points, or 0.1%, and Nasdaq 100 E-minis were up 1.75 points, or 0.01%.
The CBOE market volatility index edged up 0.19 points after hitting a two-month high at 24.31 in the previous session.
The benchmark S&P 500 logged its biggest one-day drop since mid-December and the Nasdaq closed lower by about 9% from its all-time high on Monday after the U.S. imposed 25% tariffs on imports from Mexico and Canada, and doubled duties on Chinese goods to 20%. A standoff between the countries could upend nearly $2.2 trillion in two-way annual trade.
China responded with additional tariffs of 10%-15% on selected U.S. imports and Canada has vowed to respond with immediate 25% tariffs.
Ford and General Motors, that have vast supply chains across north America, were steady in premarket trading after sharp declines in the previous session.
Illumina fell 3.2% a day after China banned imports of genetic sequencers from the medical equipment maker, just minutes after Trump’s tariff announcement.
U.S.-listed shares of Chinese companies Bilibili and Netease rose about 3.8% each, rebounding from Monday’s losses.
Investors are pricing in that the surcharges will fan inflation pressures, dampen demand and eat into corporate profits at a time when recent data has resurfaced expectations of a stalling economy. Futures tracking the domestically focused small-caps Russell 2000 index dipped 0.3%.
Morgan Stanley estimates that 25% tariffs on Mexico and Canada and 10% tariffs on China through 2026 could collectively reduce earnings for the S&P 500 by 5% to 7%.
“Despite certain market participants treating Trump’s tariff talk as a negotiation tactic, the latest developments show that he is serious about implementing his ‘America First’ agenda, completely ignoring the impact on the global economy,” said Achilleas Georgolopoulos, senior market analyst at brokerage XM.
Executives are also holding back on investments and expenditures as they wait for more clarity on Trump’s upcoming policies. Analysts say April 1 will be the date when the president is likely to announce his full-fledged global trade policy.
Interest rate futures point to the Federal Reserve delivering at least three 25 basis points interest rate cuts by December, up from about two on Monday, as traders bet on the likelihood that slowing growth could nudge the central bank to lower borrowing costs.