Trump lifts steel and aluminum tariffs, ADP report ahead - what’s moving markets

Investing.com - U.S. stock futures are muted, with the focus turning to the prospect of high-level trade negotiations between the U.S. and its largest trading partners, particularly China. The White House has reportedly given countries until Wednesday to deliver their best offer for trade talks, while President Donald Trump has made good on a threat last week to further increase tariffs on steel and aluminum. Elsewhere, Trump’s aggressive trade agenda could be a major factor in private payrolls data and earnings from discount retailer Dollar Tree (NASDAQ:DLTR) later today.

1. Futures muted

U.S. stock futures were subdued on Wednesday, as investors weighed the Trump administration’s move to hike tariffs on steel and aluminum against optimism over possible trade talks.

By 03:30 ET (07:30 GMT), the Dow futures contract and S&P 500 futures were mostly unchanged, while Nasdaq 100 futures had dipped by 19 points, or 0.1%.

The main averages on Wall Street ended higher on Tuesday, buoyed in particular by chip stocks, with traders awaiting more details on potential trade negotiations between the U.S. and a host of other countries.

The White House has said that President Donald Trump will speak with Chinese counterpart Xi Jinping this week, just days after Trump accused Beijing of violating a prior agreement to ease tit-for-tat levies. China has refuted the allegations. Writing on Truth Social on Wednesday, Trump called Xi "very tough" and "extremely hard to make a deal with".

"Markets may also be adopting a slightly more optimistic stance on U.S.-China trade tensions ahead of the scheduled Trump-Xi call this week," strategists at ING said in a note to clients. "Recently, such direct talks have eased trade pressures."

2. Higher metals tariffs take effect

Meanwhile, media reports have said that Trump officials have given countries until Wednesday to put forward their best offer for negotiations related to the U.S.’s heightened "reciprocal" tariffs.

A delay to the punishing import duties, which were first unveiled at a "Liberation Day" event in April, is due to expire in early July.

Despite indications that Washington is open to trade talks, Trump has pushed to ratchet up his tariff agenda again, this time by lifting the levy rate on most imported steel and aluminum doubled to 50%.

Trump signed an executive proclamation increasing the tariffs late on Tuesday, following through on a surprise threat launched last week. The duties will be in effect from Wednesday.

“I have determined that it is necessary to increase the previously described steel and aluminum tariffs to adjust the imports of steel and aluminum articles and their derivative articles so that such imports will not threaten to impair the national security,” Trump wrote in the proclamation, which was posted to the White House website.

He argued that the tariffs will dissuade dumping of the commodities in the U.S. by other countries, and also boost the competitiveness of American steel producers. Steel and aluminum derivative products will also be subject to the elevated trade taxes.

3. ADP (NASDAQ:ADP) jobs report ahead

Markets will have the chance to parse through private payrolls data later today that could shed further light on the impact of Trump’s tariff agenda on the American labor market.

Economists anticipate that the ADP National Employment Report will show that private employers added 111,000 jobs in May. The reading slowed sharply to 62,000 in April -- a decline that was attributed by ADP to "employers [...] trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data".

It can be more difficult for companies to make hiring decisions in this type of operating environment, ADP flagged.

Separate data on Tuesday from the U.S. Labor Department found that job openings grew in April, although layoffs increased, potentially indicating some softening in the labor market.

The figures serve as precursors to the release of the all-important monthly nonfarm payrolls report on Friday.

4. Dollar Tree to report

Dollar Tree is set to report its first-quarter earnings before the market opens on Wednesday, with the discount retailer expected to benefit from demand from cost-conscious customers grappling with heightened economic uncertainty.

Expectations for a strong print from Dollar Tree grew following a consensus-beating result from rival Dollar General (NYSE:DG) on Tuesday.

Dollar General has reported net sales and earnings for the period that topped Wall Street estimates, leading the group to lift its full-year financial guidance.

Like many retailers, Dollar General previously outlined a relatively cautious approach to the coming months, as companies attempt to assess the effect of Trump’s tariffs on customer behavior. Economists have warned that the duties could drive up inflationary pressures and weigh on broader growth.

But Dollar General said that, following the outperformance in its most recent quarter, it expects that it will be able to mitigate a significant portion of the tariffs at their current rates. Consumer expenditures could face headwinds from levy-related price increases, however, the firm warned.

The statement helped boost shares in both Dollar General and Dollar Tree on Tuesday.

5. Oil choppy

Oil prices hovered around the flatline Wednesday, falling back from recent highs generated by increasing OPEC+ output and concerns that tariffs will hit global economic activity.

At 03:30 ET, Brent futures were unchanged at $65.63 a barrel, and U.S. West Texas Intermediate crude futures was flat at $63.40 per barrel.

Both benchmarks climbed about 2% on Tuesday to a two-week high, driven by worries over supply disruption from Canadian wildfires and expectations that Iran would reject a U.S. nuclear deal proposal key to easing sanctions on the major oil producer.

Additionally, the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed to keep output increases in July at 411,000 barrels per day, which was less than some in the market had feared.

This article first appeared in Investing.com