Business & Finance

U.S. Stocks Slide as Tariff Concerns Spark Market Volatility

U.S. stocks opened lower on Tuesday, rattled by escalating trade tensions after former President Donald Trump announced sweeping tariffs on Canada, Mexico, and China. The move heightened fears of a potential trade war, sending markets into a sharp decline.

Stock Market Reaction

By 10:06 A.M. ET:

The S&P 500 dropped 1.69%, losing 102.33 points to settle at 5,938.20.
The Dow Jones Industrial Average lost 1.4%, dropping 624.41 points to 43,920.25.
The Nasdaq Composite fell 2.16%, down 423.65 points to 19,203.79.
The 10-year Treasury yield fell to 4.498%.

Tariffs Breakdown

The new tariffs include:

25% duties on Canadian and Mexican goods, except Canadian oil, which faces a 10% tariff.
10% tariffs on Chinese imports.
Trump indicated that Europe could be the next target of tariff measures, citing concerns over "illegal aliens and deadly drugs killing our Citizens, including fentanyl."
The 10-year Treasury yield fell to 4.498%.

Global Response

Canada retaliated with a 25% tariff on approximately $107 billion worth of U.S. goods.
Mexico is evaluating its own tariff measures.
China said it would take the case to the World Trade Organization (WTO), but experts say that may take a while. Market analysts were caught off guard by the sudden imposition of the tariffs, even though Trump had warned about them.

It is “not just the scale of the tariffs that caught markets off guard, but the speed at which they’re being enacted and the swift retaliation from Canada and Mexico,” noted Matthew Ryan, head of market strategy at Ebury.

Economic Impact

Economists threaten that if the tariffs continue, global economic growth will slow.

Oxford Economics' chief U.S. economist Ryan Sweet stated that the tariffs will likely cut 0.7 percentage points from U.S. economic growth in 2025. While he believes a U.S. recession can be avoided, Canada and Mexico are expected to suffer more.
JP Morgan’s Michael Feroli warned that the tariffs could spur inflation, though the extent depends on how long they remain in effect and whether exemptions are granted.

Effect on Interest Rates

The inflationary impact of the tariffs is likely to postpone any interest rate cuts by the Federal Reserve.

Stock Market Outlook

Stock markets worldwide reacted negatively to the news, though some experts believe U.S. equities could still outperform global markets.

Thomas Matthews, head of Asia Pacific markets at Capital Economics, noted that while the tariffs are harmful to U.S. stocks, they could be even more damaging to international markets.
He remains cautious, warning that if tariffs remain or escalate, market volatility could worsen.
Trump has scheduled meetings with Canadian and Mexican officials, suggesting negotiations may ease tensions.