Broker-dealer and bank stocks fall after first day of tariffs

US financial services companies took a hit in their stock prices Tuesday following the high tariffs President Donald Trump instituted on goods from Canada, Mexico, and China.

While the impact on the broader US stock market was muted, with the S&P 500 down 1.22 percent for the day by closing, the Dow Jones Industrial Average down 1.55 percent, and the Russell 2000 down 0.4 percent, the effects on the financial sector were much more pronounced.

The NYSE Arca Securities Broker/Dealer Index was down by roughtly 2.7 percent just before closing. The effects on individual companies varied, but most were down much more than the wider stock market. Morgan Stanley fell 5.74 percent. Wells Fargo was down 4.84 percent. JP Morgan closed 3.98 percent lower. Ameriprise was down 6.33 percent. Raymond James fell by 4.07 percent. LPL Financial was down 6.24 percent. And Charles Schwab closed 3.8 percent lower.

The tariffs include 25 percent on goods from Canada and Mexico and 20 percent on those from China. Shortly after the tariffs took effect, Canada and China responded with their own retaliatory tariffs, and Mexico indicated that a response was coming.

Canada Prime Minister Justin Trudeau held a press conference Tuesday morning, calling Trump’s measures “dumb,” noting that the stated goals of reducing fentanyl into the US and expanding the country’s banking presence in Canada were a veneer. The reason for the tariffs is to damage Canada’s economy to the point where Trump would try to annex the country, Trudeau said, a development that he pledged would never happen. Rather, a trade war serves to hurt allies who do better when working together, he said.

“This is a trade war, yes. But Canadians are hurt. Canadians are angry. We’re going to choose to not go on vacation in Florida or Old Orchard Beach or wherever,” he said. “We’re insulted. … But we’re Canadian, which means we’re going to stand up for each other. We’re going to fight. We’re going to win.”

Trudeau planned to meet with the country’s premiers later in the day to decide how to further respond, he said.

Whether Trump retreats from the tariffs could be a matter of how US markets perform in the coming weeks or months. An example of that was seen during his first term, when the 2018 trade war with China led the S&P 500 to slide 10 percent over five months before a truce was reached, said Tom Essaye, founder of the Sevens Report, in that firm’s newsletter Tuesday morning.

“The constant tariff threats along with all the headline general policy volatility is being driven by the administration. So, if tariffs (or threats of tariffs) lead to very steep market declines, the administration can simply reverse course,” the newsletter read. “Put more plainly, President Trump can simply back off tariff threats and reduce the policy-driven anxiety. And I say that because we’ve seen it before, during Trade War 1.0.”