U.S. stocks tumbled in early morning trading Tuesday, following declines on global markets, as steep new tariffs on major U.S. trading partners took effect.
On Tuesday, President Donald Trump implemented 25 percent tariffs on imports from Canada and Mexico, along with a 10 percent increase in tariffs on Chinese goods, bringing them to 20 percent. In response, Canada, Mexico and China have announced retaliatory measures, sparking fears of a prolonged trade war.
Why It Matters
The tariffs are expected to disrupt supply chains and increase costs for businesses and consumers alike. Canada’s Prime Minister Justin Trudeau condemned the tariffs, stating, “Canada will not let this unjustified decision go unanswered,” and China hit back with 15 percent duties on U.S. farm exports.
Michael M. Santiago/Getty Images
What To Know
Stocks plummeted in morning trading on Wall Street, erasing all S&P 500 gains since Election Day. The wipeout extended from Monday, when the Dow Jones Industrial Average dropped 1.5 percent, while the S&P 500 fell 1.8 percent, and the tech-heavy Nasdaq slumped 2.6 percent.
Meanwhile, Japan’s Nikkei index fell 1.2 percent and Hong Kong’s Hang Seng was down 0.4 percent Tuesday. In Europe, the FTSE 100 fell 0.38 percent, and the DAX was down 1.64 percent not long after markets opened.
Early Tuesday, U.S. benchmark crude oil dropped 93 cents to $67.44 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude declined by $1.10 to $70.52 per barrel.
The U.S. dollar weakened to 149.86 Japanese yen from 149.50 yen, while the euro edged up to $1.0519 from $1.0488.
Bitcoin fell 8.7 percent to approximately $83,900, according to CoinDesk.
Monday’s stock market selloff erased early-year gains and investors are bracing for slower global economic growth. Expectations for U.S. interest rate cuts have risen, with markets now pricing in a potential 75-basis-point reduction this year to counteract economic turbulence, according to Reuters.
Market analysts warn that China could further restrict imports from the U.S., potentially redirecting demand to South America.
Ahn Young-joon/AP Photo
What People Are Saying
Sandy Pei, senior portfolio manager for Asia ex-Japan at Federated Hermes Limited, told Newsweek: “[China’s] measured retaliation suggests that Beijing is open to negotiations and hopes that U.S. farmers, who are key Trump supporters, might influence his decisions.”
David Solomon, Goldman Sachs CEO, speaking at a conference in Australia, said: “I’m spending a lot of time talking to CEOs who are really trying to understand the consequence of some of this…I think we’re going to live with a slightly higher level of volatility.”
Francis Lun, CEO of Geo Securities in Hong Kong, said: “I don’t think China will buy any more U.S. farm products. The orders will go to South America. I think all in all, it’s a lose-lose situation. Nobody gains anything.”
Chang Wei Liang, a currency and credit strategist at DBS, said: “It is difficult for markets to get on with aggressive positioning given the risk of U.S. tariff policies turning on a dime.”
Gerard Lyons, chief economic strategist at Netwealth, told Newsweek: “It is hard to quantify fully the impact, but in qualitative terms the markets believe tariffs will raise prices. In turn, this, plus the resilience of the U.S. economy, has dampened expectations about U.S. policy rate cuts.”
What Happens Next
With retaliatory measures from Canada, Mexico, and China already announced, investors and businesses are waiting to see whether further escalation will follow. Trump has also hinted at additional “reciprocal tariffs” set to be imposed next month.
If tensions continue to rise, analysts expect further volatility across financial markets, with the possibility of additional rate cuts from the Federal Reserve to mitigate economic fallout. Meanwhile, supply chain disruptions and increased costs could impact consumer prices in the coming months.
This article contains reporting from The Associated Press
Updates 3/4/25, 9:42 a.m. and 11:23 a.m. ET: This article was updated with comment from Gerard Lyons and Sandy Pei plus additional information.