Battle Over Tariffs Keeps Markets on EdgeBattleOverTariffsKeepsMarketsonEdge

A volley of tariffs and trade negotiations took stock, bond and currency markets on a roller-coaster ride this week. President Donald Trump’s plan to impose tariffs on Canada, Mexico and China beginning on Tuesday unnerved investors, but an ensuing round of talks averted a multi-front trade war for the time being. The US, Canada and Mexico reached last-minute agreements that put the new levies on hold for a month, with America’s neighbors pledging to increase border security and crack down on drug trafficking. However, the US followed through with a 10% tariff on goods from China. Beijing’s response included tariffs on American energy, export controls, and an antitrust investigation targeting the tech industry.

A brewing trade war has kept global markets on edge amid uncertainty over negotiations and potential economic effects, from growth to inflation. The Bank of Canada, which cut interest rates for a sixth straight meeting and reduced its 2025 growth estimate, warned last week that a trade conflict “would badly hurt economic activity” in the country. In the US, the next jobs report on Friday is expected to show that employers added 169,000 jobs in January, down from 256,000 in December but a sign that unemployment remains low. PGIM Fixed Income’s Weekly View from the Desk explores how tariffs—and the unpredictable nature of their rollout—could impact markets and the economy.