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Dow Jones bounces as tariff threats give way to concessions

  • The Dow Jones gained 550 points from Tuesday’s tumble.
  • Equities remain tepid as investors hope for signs of easing trade war tensions.
  • Services PMI figures beat the street, but ADP payrolls figures missed the mark.

The Dow Jones Industrial Average (DJIA) bounced from this week’s steep two-day plunge, recovering ground as investors try to prop the market back up. Equities took a hit after United States (US) President Donald Trump finally let his own tariffs on Canada, Mexico, and China take effect, but investors are hoping for another round of concessions and delays to ease trade war pressures.

USD ADP Employment Change payroll changes came in far below expectations, showing far fewer new jobs in February than median market forecasts. ADP showed just 77K net new job additions in February, well below March’s revised print of 186K, and flubbing the forecast of 140K. Despite the downside print, not all hope is lost for this week’s Nonfarm Payrolls (NFP) jobs report: the monthly ADP Employment Change has suffered a terrible run of non-correlation with NFP results ever since ADP changed their reporting and measurement methodology in 2022, so a bad or good print fails to signal much of anything at all.

The Trump administration is doing all of the hard work for everyone this week, with the White House declaring on Wednesday that it would grant a one-month delay on tariffs for the automotive industry. The US automotive manufacturing industry is heavily reliant on foreign trade, forcing Donald Trump’s hand on retroactively declaring a brief exemption for his own country’s auto industry as his team scrambles to figure out how to impose stiff tariffs on all of the US’ closest trading partners without devasting their own economy.

Dow Jones news 

Most of the Dow Jones’ listed securities are testing into the high side on Wednesday, looking to stage a recovery following this week’s tariff-inspired weakness. Chevron (CVX) fell 1.8% at its lowest, slipping below $150 per share after the Trump administration stripped away the energy conglomerate’s license to operate in Venezuela. Ostensibly, the Trump team feels Venezuelan President Nicolás Maduro has not done enough to reform the country’s electorate in the US’ image and is not generally willing to accept deported migrants who may or may not actually be Venezuelan.

Dow Jones price forecast

The Dow Jones managed to stop the bleeding this week, at least for now. Price action is battling it out to try and keep a foothold in the 43,000 level after catching a rough bounce from the 42,400 level.

The DJIA is dangerously close to making physical contact with the 200-day Exponential Moving Average (EMA) for the first time in over two years. However, the 200-day EMA is beginning to show signs of slowing, which could give bidders a chance to gather their feet beneath them and carry on the trend of outrunning the key moving average.

Dow Jones daily chart

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.