Investing.com -- President Trump’s newly announced tariffs on Canada, Mexico, and China have introduced another layer of uncertainty for markets, but the latest Sevens Report says they are not yet a "bearish game changer" for the S&P 500.
Over the weekend, the administration imposed a 25% import tariff on Canada and Mexico, along with a 10% tariff on China.
The stated rationale is to pressure these countries into taking stronger action against illegal fentanyl shipments. However, the move also aligns with Trump’s reported desire to renegotiate the USMCA trade agreement ahead of its 2026 review.
While the tariffs add another headwind for equities, Sevens Report argues that they do not warrant an immediate reduction in equity exposure.
“Earnings and economic growth (the two most important foundational forces for stocks) are still solid,” the analysts wrote. However, they caution that “the factors that push stocks higher are being weakened or eliminated one-by-one,” while downside risks are mounting.
The broader market had been showing resilience even after last week’s DeepSeek news, which dealt a blow to AI sentiment, but the tariffs could undermine that strength.
“These tariffs potentially undermine that positive price action from the ‘rest’ of the market and could weigh on other sectors while DeepSeek weighs on tech,” the analysts noted.
The firm says a key question now is whether the tariffs will actually be implemented or if they are simply a negotiating tactic.
“Most still believe this is all a negotiation and that the tariffs won’t be on for long (and that’s still probably right),” the report states. However, with AI uncertainty and elevated valuations already straining investor sentiment, Sevens Report warns that “the recipe is coming together for a solid and extended pullback.”