S&P 500 falls 1.8% as Trump enforces tariffs on Canada and Mexico, sparking market uncertainty
On Monday, US stocks dropped sharply after Donald Trump confirmed that tariffs on Canadian and Mexican imports would take effect within hours, BNN Bloomberg reported.
The S&P 500 lost 1.8 percent after Trump declared there was “no room left” for negotiations to reduce the tariffs scheduled for Tuesday. He had previously postponed the tariffs to allow more time for discussions.
Wall Street had anticipated that Trump might opt for a less severe trade approach, but his decision to move forward with tariffs sent markets lower.
The S&P 500’s post-Election Day gains shrank to just over 1 percent, down from a peak of more than 6 percent. The market’s earlier rally had been driven by expectations that Trump’s policies would support economic and business growth.
The Dow Jones Industrial Average dropped 649 points, or 1.5 percent, while the Nasdaq composite fell 2.6 percent. The downturn capped a volatile stretch for Wall Street.
The S&P 500 had previously hit record highs last month, bolstered by stronger-than-expected earnings from major US firms.
However, a series of weak economic reports triggered a pullback, with data showing that US consumers were increasingly pessimistic about inflation due to the tariff threat.
Monday’s manufacturing report indicated that US industrial activity continued to expand, but not as strongly as economists had expected. A more troubling sign for manufacturers was the contraction in new orders.
Meanwhile, rising prices raised questions over who would bear the cost of the tariffs.
Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee, stated, “Demand eased, production stabilized, and destaffing continued as panelists’ companies experience the first operational shock of the new administration’s tariff policy.”
Investors had hoped Trump’s tariff threats were a negotiating tool, expecting a less damaging resolution. However, his decision to move forward with tariffs on Mexico and Canada increased uncertainty in the market.
Technology stocks took heavy losses. Nvidia dropped 8.8 percent, while Tesla fell 2.8 percent.
Grocery chain Kroger also declined 3 percent after Chair and CEO Rodney McMullen resigned following an internal investigation into his personal conduct.
Stocks tied to the cryptocurrency sector also suffered losses, despite an early rally after Trump announced that his administration was progressing with a crypto strategic reserve.
MicroStrategy, now operating as Strategy, lost 1.8 percent, while Coinbase, a major crypto trading platform, declined 4.6 percent.
By the close of trading, the S&P 500 had dropped 104.78 points to 5,849.72.
The Dow Jones Industrial Average fell 649.67 points to 43,191.24, and the Nasdaq composite declined 497.09 points to 18,350.19.
Across the Pacific, Chinese manufacturers reported an increase in orders for February as importers rushed to secure goods before higher US tariffs took effect.
Meanwhile, Chinese state media indicated that Beijing was considering retaliatory actions.
Trump had already imposed a 10 percent tariff on Chinese imports, which was set to rise to 20 percent on Tuesday. Additionally, he eliminated the “de minimis” exemption, which had allowed imports valued under US$800 to enter tariff-free.
Hong Kong’s stock market saw gains, with Chinese bubble tea chain Mixue Bingcheng surging 43 percent in its US$444m market debut. The company, which claims to be the world’s largest food retail chain with over 45,000 outlets, benefited as the Hang Seng index rose 0.3 percent.
European and Japanese markets also advanced.
European stocks jumped following a report indicating easing inflation in February, raising expectations that the European Central Bank would announce an interest rate cut later in the week.
Germany’s DAX climbed 2.6 percent, while France’s CAC 40 gained 1.1 percent.
In the bond market, the yield on the 10-year Treasury note fell to 4.16 percent from 4.24 percent after the manufacturing report was released. Yields have declined significantly since January, when they neared 4.80 percent, reflecting concerns about a slowing US economy.
Morgan Stanley strategists, led by Michael Wilson, noted that falling Treasury yields typically support stock prices by making borrowing cheaper, but in this case, the decline signals weaker economic growth, which could limit any potential market boost.
The Federal Reserve would normally cut interest rates to support the economy, but concerns over inflation may restrict its ability to do so.
