President Trump’s decision to impose sweeping tariffs on some of America’s largest trading partners sent shock waves through global markets on Monday. Stocks dropped sharply on Wall Street, following a global slump overnight as investors sold shares of companies that would be hardest hit by the tariffs on imports from Canada, Mexico, and China. The chaotic on-and-off-again rollout of the Trump administration’s plans whipsawed markets, and traders scrambled to adjust to developments as they unfolded.
An announcement late Monday morning stated that tariffs on Mexico would be delayed for a month, followed by a similar post-market closure announcement about the tariffs on Canada. However, tariffs on China are still set to proceed. As trading shook out, the dollar held on to broad gains, even as the peso and Canadian dollar clawed back losses.
Oil prices, which had risen over 3 percent earlier on Monday, settled back to a rise of around 1 percent. Major stock indexes in the United States also recovered some losses. By the end of the day, the S&P 500 had dropped 0.8 percent, while the technology-heavy Nasdaq fell 1.2 percent.
When Mr. Trump was elected, many analysts and investors had dismissed his aggressive tariff talk as bluster intended to prompt negotiation from his global counterparts. Over the weekend, the new administration followed through on the president’s promise to impose a 25 percent tariff on imports from Canada and Mexico, the United States’ closest trading partners.
Canadian energy products would be levied at 10 percent, as would goods from China. The market’s reaction underscores the uncertainty and volatility spurred by the new trade measures, leaving investors and businesses to navigate a rapidly changing economic landscape. Countries such as Canada and Mexico, as well as some allies in Asia, are among the US’s main suppliers.
Trump has said his latest tariffs will take effect on 12 March “without exceptions or exemptions.” With just over a month to go before the tax kicks in, US trading partners are weighing their options. Canada, as one of the largest suppliers of both commodities to the US, stands to lose significantly. Canada’s industry minister François-Philippe Champagne has called the decision “totally unjustified.” He emphasized that Canadian steel is crucial for key US industries, including defense, shipbuilding, and energy, making “North America more competitive and secure.” Champagne warned that Canada’s response would be “clear and calibrated.”
The UK has announced it “will take a considered approach” and intends to negotiate a deal with the US.
Chancellor Rachel Reeves expressed confidence that a deal could be reached. European Commission President Ursula von der Leyen has said the EU will impose “firm and proportionate countermeasures” if the US tariffs go ahead, indicating that the EU will act to safeguard its economic interests.
Tariffs disrupt global financial stability
It’s still unclear what deals or waivers might emerge before the tariffs take effect. The ripple effects of these tariffs could reshape global trade dynamics, pushing US trading partners to explore alternatives and potentially escalating trade tensions. Stocks tumbled on Monday as Wall Street braced for the impact of new tariffs ordered by President Trump, sparking fears of a trade war that could crimp corporate profits.
However, the losses moderated after Mr. Trump later said that he would delay imposing tariffs on Mexico and Canada for one month. His announcement, made on his Truth Social app, came after Mexico President Claudia Sheinbaum agreed to send 10,000 soldiers to the border.
Canadian Prime Minister Justin Trudeau also announced a $1.3 billion plan to protect the border. The Dow Jones Industrial Average shed 122 points, or 0.3%, to 44,421 after dropping as much as 1.5% in earlier trading. The S&P 500 lost 0.8%, recovering after dropping as much as 1.9%, while the tech-heavy Nasdaq composite index closed 1.2% lower after shedding as much as 2.5%.
Shares in automakers were hard hit on Monday as Wall Street assessed the impact of Mr. Trump’s tariffs on the auto industry. Americans are increasingly buying cars that are either built in Canada or Mexico or that use parts imported from those nations.
General Motors fell 5.5%, Ford lost 3.9%, and Tesla tumbled 5.4% in early trading. Constellation Brands, the maker of Corona beer and Robert Mondavi wine, skidded 4.7% after some Canadian officials said they planned to remove American alcohol brands from government store shelves. Manufacturers also faced declines early Monday, with farm equipment maker Deere & Co.
tumbling 3.1% and Caterpillar dipping around 2.9%. Mr. Trump’s promise of tariffs in the lead-up to the election was part of the reason the Federal Reserve dialed back the number of interest rate cuts it expected to impose this year.
Originally, the central bank had projected four cuts, but slashed that number to two at their December meeting, citing persistent inflation that could worsen under Mr. Trump’s trade and immigration policies.
