Stocks took a sharp dive before the start of trading on Monday following President Trump’s decision to impose new tariffs on key US trading partners including China, Canada and Mexico.
The Dow Jones Industrial Average dropped 560 points, or 1.27%, while the S&P 500 declined 1.6%, falling 95 points.
The Nasdaq lost 1.95% to drop nearly 400 points and the Russell 2000, which tracks small-cap stocks, fell 2.3% or 52 points.
The Cboe Volatility Index, a key measure of investor sentiment, briefly spiked above 22 before settling around 19, reflecting rising market anxiety.
The move by Trump to levy tariffs on imports from Canada, Mexico and China has heightened concerns about the potential impact on inflation and economic growth, fueling fears of a global trade conflict.
The tariffs have particularly impacted companies with supply chains tied to North America.
General Motors saw its stock plummet 5.6%, while Ford declined by 4%. Suppliers such as Aptiv and Avery Dennison were also hit, falling 5% and 2%, respectively.
Other affected firms included Constellation Brands, which imports alcohol from Mexico, dropping 5%, and Chipotle, which relies on Mexican avocados, slipping 3%. Apparel companies such as Nike and Lululemon also experienced losses.
Conversely, steel manufacturers emerged as beneficiaries of the policy shift. Nucor gained 2%, while Steel Dynamics rose nearly 4% as investors anticipated stronger demand for domestic steel production.
Markets around the world reacted swiftly to the news.
European stocks saw a significant decline, with Germany’s DAX index falling nearly 2%.
Bitcoin also took a hit, dropping from above $102,000 to around $95,000, while ether lost 11%.
Meanwhile, the US dollar gained strength, with the ICE US Dollar Index jumping nearly 1%. The tariffs also had an impact on energy prices.
West Texas Intermediate crude jumped 2% to $74.20 per barrel, while Brent crude saw a 1% rise, reaching $76.42 per barrel.
The tariffs announced on Saturday included a 25% levy on goods from Mexico and Canada, along with a 10% tariff on imports from China.
Energy imports from Canada faced a slightly lower 10% tariff.
Canada responded with its own retaliatory measures, while Mexico indicated it would explore similar actions against US imports.
China, on the other hand, declared its intent to challenge the tariffs at the World Trade Organization. Trump also suggested that tariffs on European Union goods could follow.
European Union officials cautioned that they would respond firmly if Trump follows through with additional tariffs on European imports.
Economists and analysts have expressed concern over the latest developments.
A report from Goldman Sachs noted that while the direct economic impact of the tariffs may be limited, the broader consequences could be significant.
The statement warned that these measures could deepen fears about future trade policy risks and retaliation from affected countries.
Market strategists have emphasized that investors should take the administration’s tariff plans more seriously. According to a report from Wolfe Research, if this shift in policy expectations is suddenly reflected in market pricing, the coming days could see considerable volatility.
The timing of the tariff announcement coincides with an important earnings period, with over 120 S&P 500 companies set to release quarterly reports. Among the high-profile firms reporting this week are Alphabet, Amazon, and Palantir, along with consumer brands like Disney and Mondelez.
Additionally, the latest nonfarm payrolls report, scheduled for Friday, is expected to indicate that 175,000 jobs were added last month, based on estimates from Dow Jones analysts.
Despite recent market turbulence, stocks ended January on a positive note. The S&P 500 advanced 2.7%, while the Nasdaq Composite gained 1.6%. The Dow Jones Industrial Average led the way with a 4.7% increase for the month.
With escalating trade disputes and a volatile market environment, analysts anticipate continued uncertainty in the weeks ahead. Market trends will largely depend on further developments in trade policy, corporate earnings results, and key economic indicators set to be released in the coming days.
Investors are closely monitoring Washington’s next steps as they brace for potential economic repercussions of the latest round of tariffs.
