TLDR
- Wall Street set to extend losses as Trump’s tariffs on Mexico, Canada, and China spark retaliations
- Major indexes declined significantly with S&P 500 posting its biggest drop since December
- China has already retaliated with tariffs up to 15%, while Canada and Mexico plan responses
- Automotive companies like Ford and GM fell due to their extensive North American supply chains
- Investors worry tariffs will increase inflation, reduce demand, and cut corporate profits by 5-7%
Wall Street braced for more losses on Tuesday as markets reacted to President Donald Trump’s new tariffs on major trading partners. The move sparked fears of a widening trade war that could hurt economic growth and corporate profits.
The tariffs on Mexico, Canada, and China took effect at midnight. Trump imposed 25% duties on imports from Mexico and Canada. He also doubled tariffs on Chinese goods with an additional 10% levy.
The market response was swift and negative. On Monday, the S&P 500 dropped 1.8%, marking its biggest one-day fall since December. The Dow Jones Industrial Average fell nearly 650 points. The Nasdaq Composite declined 2.6%, pushing it close to correction territory.
Futures trading on Tuesday morning showed the selloff continuing. Dow futures were down 0.3% to 0.37%. S&P 500 futures lost 0.7% to 0.72%. Nasdaq futures declined 0.8% to 0.9%.
The CBOE market volatility index climbed to a two-month high. This shows growing investor concern about market stability. The index rose 1.48 points after hitting 24.31 in the previous session.
Trading partners wasted no time in responding to the U.S. tariffs. China announced additional tariffs of up to 15% on some U.S. products. Canadian Prime Minister Justin Trudeau said his country would apply a 25% levy on U.S. goods.
Mexican President Claudia Sheinbaum said Mexico would respond with tariffs and other tools. She stated these measures would be announced this weekend. The standoff between these countries could disrupt nearly $2.2 trillion in annual two-way trade.
Auto companies with supply chains across North America saw their stocks fall. Ford and General Motors each slipped about 1.3% in premarket trading. Both companies have lost value this year on fears about tariffs, with GM down 11% and Ford down 5%.
Technology companies also felt the impact. Nvidia shares dropped more than 2% before the market opened. The chip giant has struggled in 2025 as investors question what’s next for the AI company. Nvidia has fallen more than 12% over the past week.
Other tech giants faced losses too. Microsoft, Meta, and other heavyweight companies lost between 1.6% and 3% in premarket trading. Illumina fell 4% after China banned imports of its genetic sequencers, a move that came shortly after Trump’s tariff announcement.
The new tariffs could have wide-ranging effects on the U.S. economy. Experts warn they will likely increase inflation pressures. They may also dampen consumer demand and reduce corporate profits.
Morgan Stanley estimates that tariffs could cut S&P 500 earnings by 5% to 7%
Morgan Stanley estimates that tariffs on imports from Mexico, Canada, and China through 2026 could cut S&P 500 earnings by 5% to 7%. This comes at a time when recent data has raised concerns about economic slowdown.
Investors are adjusting their expectations for Federal Reserve policy. Interest rate futures now point to at least three 25-basis-point rate cuts by December. This is up from about two cuts expected on Monday, as traders bet that slowing growth might force the central bank to lower borrowing costs.
Business leaders appear to be taking a cautious approach. Many executives are holding back on investments as they wait for more clarity on Trump’s upcoming policies. Analysts say April 1 will likely be when the president announces his full global trade policy.
Some companies are seeing benefits from the market uncertainty. U.S. shares of gold mining companies like Sibanye Stillwater and Gold Fields added about 2% each. This reflects investors moving to gold as a safe-haven asset during market turmoil.
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