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Concerns over President Donald Trump’s tariffs have sparked a significant downturn in U.S. stocks. The S&P 500 dropped 1.7% in early Monday trading, following similar losses in markets across Asia and Europe. The Dow Jones Industrial Average plunged 557 points, and the Nasdaq Composite fell 2.1%. The ripple effect was felt across a variety of assets, from bitcoin to the Mexican peso, not just U.S. companies likely to be hit hardest by tariffs on goods from Canada, Mexico, and China. Tech stocks, in particular, suffered, as did companies vulnerable to higher interest rates and the inflation that could stem from the tariffs. On the flip side, oil prices saw an uptick.
Wall Street is bracing for even steeper losses after Trump’s orders to impose hefty tariffs on key U.S. trading partners—Mexico, Canada, and China.
Futures for the S&P 500 dropped 1.5%, while Nasdaq futures slid 1.6%. Dow Jones futures were down by 1.2%.
Trump’s 25% tariffs on most imports from Canada and Mexico, along with 10% tariffs on Chinese goods, are set to take effect Tuesday. The president has cited issues like the production and importation of fentanyl, trade surpluses, and illegal immigration as reasons for the tariffs.
In response, Canada is imposing its own retaliatory tariffs—25% on American goods worth 30 billion Canadian dollars ($20 billion) starting Tuesday. This includes beverages, cosmetics, paper products, and more, with a second wave covering goods like steel, aluminum, cars, and food products worth an estimated 125 billion Canadian dollars ($85 billion).
This move sent stocks in the affected industries spiraling in premarket trading. Automakers took a particularly hard hit, with Volkswagen, General Motors, and Ford all seeing significant declines. Volkswagen, which sources 43% of its vehicles from Mexico, dropped 6% in European trading, while GM fell 6.3%, Ford dropped 3.9%, and Tesla tumbled 3.6% in premarket trading.
Companies like Constellation Brands, maker of Corona beer and Robert Mondavi wine, also saw losses after Canada announced plans to remove American alcohol brands from government store shelves, causing Constellation’s stock to slide 6.7%.
Other manufacturers, including Deere & Co. and Caterpillar, also took a hit, with Deere falling 4.5% and Caterpillar losing around 2%.
Mexico has yet to specify the rate or list of products for its retaliatory tariffs, but it has confirmed the measure.
Trump’s tariff announcements, made ahead of the election, played a role in the Federal Reserve’s decision to scale back its planned interest rate cuts. Originally anticipating four cuts, the Fed reduced that projection to two in December, citing persistent inflation that could worsen under Trump’s trade policies. After three rate cuts to close out 2019, the Fed held its benchmark rate steady last week, taking a more cautious approach due to the potential economic impact of Trump’s policies.
Analysts warn that the tariffs could further fuel U.S. inflation, which remains above the Fed’s 2% target.
Asian markets are bracing for volatility as well. Japan’s Nikkei 225 dropped 2.7%, while Australia’s S&P/ASX 200 fell 1.8%. South Korea’s Kospi tumbled 2.5%, and Hong Kong’s Hang Seng slid slightly. Shanghai’s market was closed for a holiday.
Yeap Jun Rong, a market strategist at IG, noted that the trade restrictions could lead to reduced global trade, supply chain disruptions, and higher costs for businesses, all of which would contribute to rising inflation.
On a more positive note, shares of SoftBank Group rose 0.5% after the company announced a new partnership with OpenAI to create SB OpenAI Japan, a venture aimed at providing AI services to businesses.
Meanwhile, some technology stocks in Hong Kong held steady, despite the looming tariff threat. This could be partly attributed to the rising strength of China’s tech sector, spurred by news of DeepSeek—a Chinese startup working on a more affordable large language model that could compete globally. This innovation has raised questions about the need for continued investment in AI chips, causing some tech stocks to dip.
European markets also took a hit. By midday, France’s CAC 40 had fallen 1.9%, Germany’s DAX dropped 2%, and the U.K.’s FTSE 100 was down 1.3%.
In commodity trading, U.S. crude jumped by $1.66 to $74.19 per barrel, while Brent crude rose by $1.11 to $76.78 per barrel.
In currency markets, the U.S. dollar weakened against the yen, dropping to 154.58 from 155.18, while the euro also saw a slight dip, costing $1.0279 compared to $1.0363 previously.
Bitcoin extended its weekend losses, falling under $95,000 after hovering around $105,000 for much of the previous two weeks.
