Wall Street’s response to more tariffs: Been there, done that

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Subscribe to enjoy similar stories. Wall Street isn’t thrilled about the return of Donald Trump’s tariff threats. But traders are hardly panicking either.

Shares of automakers were hit hard this week after the president-elect promised to levy hefty tariffs on imports from Canada and Mexico on his first day in office, along with additional tariffs on Chinese goods. Canadian railroad companies slumped, while Mexican and Canadian currencies weakened against the U.S. dollar.

Even so, broad indexes of stocks pushed higher, with the Dow Jones Industrial Average climbing to yet another record on Tuesday. Some investors said they had learned lessons from the craze for trading Trump’s social-media posts that followed his first electoral win. Back then, Trump often sparked big swings in stocks, commodities and currencies with surprise broadsides—only for the moves to unwind when negotiations progressed, he de-escalated, or workarounds mitigated the biggest threats to the economy or corporate profits.

The result was heightened volatility and higher tariffs on Chinese imports in particular. But stock returns over Trump’s entire four years in office proved robust. This time, investors have been heartened by Trump’s pick of Scott Bessent as Treasury secretary.

He is a seasoned investor viewed by many as a potentially moderating influence on the president. “The market is constantly trying to ask itself: What will happen and what is just posturing?" said Michael Antonelli, a managing director at Baird. “It’s very reminiscent of the 2016 to 2020 time period." Taking Trump’s words at face value, investors have more to fear from his trade policies now.