Investors react to tariffs on Canada, Mexico, and China, pushing markets lower amid economic uncertainty
On Tuesday, the Dow Jones Industrial Average dropped for a second consecutive day as investors reacted to US President Donald Trump’s tariffs, raising concerns about economic fallout.
According to CNBC, the index fell 670.25 points, or 1.55 percent, closing at 42,520.99. This added to Monday’s nearly 650-point drop.
The S&P 500 declined 1.22 percent, ending at 5,778.15, while the Nasdaq Composite slipped 0.35 percent to close at 18,285.16.
At their lowest levels, the Dow plunged over 840 points, the S&P 500 dropped 2 percent, and the Nasdaq fell more than 2 percent.
The Nasdaq also approached correction territory, which indicates a 10 percent decline from a recent high.
More than 80 percent of S&P 500 stocks closed lower. Some investors bought shares in companies like Nvidia, which has seen losses this year.
Investors responded to Trump’s decision to implement 25 percent tariffs on Canada and Mexico, which took effect at midnight. He also imposed an additional 10 percent tariff on Chinese goods.
China retaliated by increasing tariffs up to 15 percent on certain US products.
Meanwhile, Mexican President Claudia Sheinbaum announced that Mexico would introduce countermeasures, with details set to be released over the weekend.
Canadian Prime Minister Justin Trudeau confirmed that Canada would impose a 25 percent tariff on US goods.
In response, Trump warned that he would raise tariffs on Canada even further.
Companies that rely on imported goods saw their stock prices fall. General Motors lost more than 4 percent, while Ford dropped nearly 3 percent.
Chipotle, which sources around half of its avocados from Mexico, declined 2 percent.
Target fell 3 percent, and its CEO warned that prices on certain produce items would increase within days due to the tariffs.
With these declines, the S&P 500 turned negative for 2025, while the Dow flattened out for the year.
Investors had hoped that a last-minute agreement would prevent the full impact of tariffs on Mexico and Canada, but losses deepened on Monday when Trump confirmed that the tariffs would take effect.
Market participants remained concerned about the broader economy; especially as weak economic data compounded the impact of the tariffs. Bank and retail stocks led Tuesday’s declines as investors worried about potential further economic slowdowns.
Sam Stovall, chief investment strategist at CFRA Research, described the downturn as a “conditional correction.” He explained, “It’s really based on one condition: By how much Trump is going to retain the tariffs.”
With Tuesday’s losses, the S&P 500 dropped below its closing level from Election Day in November, when Trump secured a second term.
Investors are watching Trump’s address to Congress on Tuesday night for any potential updates regarding the tariffs, which were a central promise of his campaign.
