Wall Street Futures Decline Amid Trump's Steel and Aluminum Tariff Threats

Wall Street Futures Slip Amid Trump's Steel and Aluminum Tariff Threats

On Monday, June 2, 2025, U.S. stock index futures declined following President Donald Trump's announcement to double tariffs on imported steel and aluminum to 50%, effective Wednesday. The move, tied to accusations of China violating a trade agreement, has heightened concerns over escalating trade tensions. 

Market Reaction

In premarket trading, U.S. steel companies such as Cleveland-Cliffs, Nucor, and Steel Dynamics experienced sharp share gains. Conversely, most large-cap and growth stocks, notably Tesla, saw declines. 

The broader market reflected these concerns:

• S&P 500 futures: down 0.3%

• Dow Jones Industrial Average futures: down 0.2%

• Nasdaq Composite futures: down 0.4%

International markets also reacted negatively, with European shares sinking in early trading. 

Analyst Insights

Analysts express concerns over the potential economic impact of the tariff increase.

"The tariffs will significantly raise domestic steel and aluminum prices, benefiting steel producers. However, this will be more than offset by higher input costs for steel-consuming sectors – the net impact on the U.S. economy being higher inflation and lower growth," said Gregory Daco, head of U.S. economics at Oxford Economics. 

Former Treasury Secretary Lawrence Summers warned of a growing risk of recession, stating that raising the cost of key inputs for U.S. manufacturers amounts to economic self-sabotage. 

Global Trade Tensions

China denied violating the recent trade truce, countering President Trump's accusations and blaming the U.S. for undermining the agreement. China criticized new U.S. policies, including export-control measures for AI chips and the revocation of student visas. Despite this friction, Treasury Secretary Scott Bessent expressed optimism that a conversation between President Trump and Chinese leader Xi Jinping could resolve the issues. 

The European Union also criticized the tariff hike, stating it jeopardizes ongoing trade talks and warned of potential retaliatory measures. An EU trade delegation has been dispatched to Washington for further negotiations. 

Investor Outlook

Investors are closely watching upcoming speeches by Federal Reserve officials, particularly Jerome Powell, as well as key economic data releases, including manufacturing indices and Friday’s nonfarm payrolls report. 

The increased tariffs have particularly affected automaker and industrial stocks reliant on steel and aluminum, leading to significant sell-offs in these sectors. Conversely, U.S. steelmaker stocks have seen gains due to anticipated reduced competition from imports.