CNBC Daily Open discusses the impact of new tariffs on imports from Mexico, Canada, and China, alongside the upcoming earnings season and its potential implications for market performance. The report highlights the confluence of events – a new presidency, escalating trade tensions, and the emergence of AI advancements – creating a volatile environment for investors. While the cost of DeepSeek, a Chinese AI model, might provide a boost to the sector, the looming threat of trade war and persistent inflation cast a shadow over market optimism.
This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe on Saturday. Imports from Mexico and Canada will be hit with a 25% duty, while those from China will be subject to a 10% tariff. Energy resources from Canada will face a lower 10% tariff. The tariffs on Canadian goods are expected to take effect on or after 12:01 a.m.
ET on Tuesday. Canada's Prime Minister Justin Trudeau announced on the same day Wall Street ended 2024 on a high, but so did inflation in the U.S. The personal consumption expenditures price index, released by the U.S. Commerce Department on Friday, showed a 0.2 percentage point increase from November, in line with the Dow Jones estimate. Core PCE, which removes food and energy prices, came in flat from the previous month at 2.8%, also in line with expectations. DeepSeek might have cost 100 times more. Earnings season kicks into high gear this week, with more than 120 S&P 500 companies scheduled to report. Investors and analysts won't only be pouring through the results, they'll also want to scrutinize how CEOs respond to U.S. President Donald Trump's tariffs. They are no longer a threat but a reality. They cap off a wild January during which a new president entered the White House and a new Chinese artificial intelligence model upended the industry. But with tariffs now in place, a potential trade war brewing — making it more difficult for inflation, seemingly stuck in place, to recede — markets might find it difficult to scale new heights in the near term. Even Big Tech earnings and the jobs numbers coming out this week, typically market-moving reports, are likely to play second fiddle to policy developments. A small consolation to markets: The total cost of DeepSeek might be more than $500 million, a research firm estimated. (The $5 million figure stated by DeepSeek comprises just its training cost.) It might give AI-related companies a spring in their steps.
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