Markets Hold Steady After Lutnick Signals Possible Tariff Compromise

Investors also digest recent disappointing employment data.

President Donald Trump addresses a joint session of Congress in the House Chamber on Capitol Hill on March 4, 2025. Madalina Vasiliu/The Epoch Times

U.S. stocks held steady after the opening bell as Wall Street waited for President Donald Trump to make an announcement later in the day.

The blue-chip Dow Jones Industrial Average, the tech-heavy Nasdaq Composite Index, and the broader S&P 500 Index were little changed in the middle of the trading week.

Investors sought relief when Commerce Secretary Howard Lutnick suggested that the White House could reach a compromise with Canada and Mexico to cushion the tariff-driven economic blows.

In a March 4 interview with Fox Business, Lutnick revealed that he is constantly on the phone with Canadian and Mexican officials and noted that the president could meet them “in the middle some way” on March 5.

“And the president is listening because, you know, he’s very, very fair and very reasonable. So I think he’s going to work something out with them,” Lutnick said.

He later clarified to Bloomberg that some product categories, such as automobiles, could be exempted from the 25 percent tariffs. Lutnick reiterated that these efforts are part of broader efforts to curtail the flow of fentanyl entering the United States.

“This not a trade war; this is a drug war,” he said. “We’re trying to send a message that fentanyl has got to end, coming in from Mexico and Canada.”

So far this trading week, the financial markets have been highly volatile.

During the March 4 session, the Dow Jones plummeted almost 700 points. The S&P 500 slumped more than 1 percent, and the Nasdaq trimmed 0.35 percent.

After Trump followed through on his tariff plans for Canada, Mexico, and China, investors headed for the exits. Analysts say that traders were betting that the current administration would postpone these levies and were surprised when the president reaffirmed his commitment to imposing tariffs on the two U.S. trading partners and China.

“The market finally took the Trump administration at its word, and the realization that the tariff talk wasn’t just a negotiating tactic is starting to sink in,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note emailed to The Epoch Times.

Officials in Canada and Mexico have already vowed retaliatory measures.

Ottawa is imposing two rounds of 25 percent tariffs on more than $100 billion worth of U.S. goods, including automobiles, trucks, metals, and agriculture.

Mexican President Claudia Sheinbaum plans to outline her government’s response on March 9 in hopes of deescalating trade tensions.

Meanwhile, during his prime-time address before Congress on March 4, Trump stated that his new tariffs would trigger “a little disturbance” but were a worthwhile pursuit.

“Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,” Trump said. “There will be a little disturbance, but we’re OK with that. It won’t be much.”

Trump reaffirmed his plan to institute reciprocal tariffs on all U.S. trading partners on April 2.

Howard Lutnick, then-nominee for commerce secretary, testifies at a confirmation hearing on Capitol Hill on Jan. 29, 2025. Madalina Vasiliu/The Epoch Times

Tom Essaye, the founder and president of Sevens Research Report, said that although tariffs can negatively affect stocks, it is unknown how much the financial markets will be affected in the short or long run.

“In the near term, tariffs will be a headwind on stocks, but that’s due more to the uncertainty it’s heaping on consumers and investors as opposed to the direct negative impacts of tariffs,” Essaye said in a note to The Epoch Times.

“For long-term investors, the simple truth is it’s much too early to declare these a bearish gamechanger.”

Weak Employment Data

Markets also digested disappointing employment figures from payroll processor ADP.

According to the ADP National Employment Report, private companies added 77,000 new jobs in February, down from the upwardly revised 186,000 in January. Private sector hiring last month was the slowest since July 2024.

The reading fell short of the consensus forecast of 140,000.

“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” Nela Richardson, chief economist at ADP, said. “Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.”

The next major labor update will be the February jobs report.

Economists expected that the United States created 160,000 new jobs and the unemployment rate was unchanged at 4 percent.

“A steady as she goes job market would be akin to a win in these uncertain times,” Mark Hamrick, senior economic analyst at Bankrate, said in a statement to The Epoch Times.

He also said that worries are building because of eroding consumer confidence, elevated interest rates, and a hiring slowdown.

While observers will be waiting to determine whether the government layoffs will appear in the jobs data, it might be a bit premature to find.

“Because the survey period for the monthly jobs report revolves around the 12th of the month, it will be soon to capture the many federal government firings and departures,” Hamrick added. “We’ll continue to watch the weekly unemployment claims and forthcoming monthly snapshots for indications.”

Last week, initial jobless claims surged to a two-month high of 242,000, but this was not a result of layoffs related to the Department of Government Efficiency. The separate Unemployment Compensation for Federal Employees program revealed a mere 614 initial claims.