U.S. stocks faced a steep decline on Monday, erasing more of their post-election gains after President Donald Trump confirmed that new tariffs on Canada and Mexico would take effect within hours.
The S&P 500 tumbled 1.8% as Trump declared that there was “no room left” for negotiations on the tariffs, which are set to begin on Tuesday. Investors had hoped for a more strategic approach to global trade, but the latest policy announcement fueled market anxiety.
Dow Jones and Nasdaq Take a Hit
The Dow Jones Industrial Average dropped 649 points (1.5%), while the Nasdaq Composite saw a 2.6% decline. The market downturn erased significant gains that had been built on optimism for Trump’s economic policies. The S&P 500’s rally, which once peaked at over 6%, is now reduced to just above 1% since Election Day.
Manufacturing Slowdown and Inflation Concerns
Adding to investor worries, recent economic data indicated a slowdown in U.S. manufacturing activity. While the sector is still growing, it’s expanding at a slower pace than expected. New orders are shrinking, and inflation pressures are rising as businesses debate who will bear the cost of these tariffs.
Timothy Fiore, chair of the Institute for Supply Management, noted, “Demand is declining, production is stabilizing, and job cuts are continuing as companies experience the first effects of the administration’s tariff policies.”
Tech Stocks and Retail Suffer Losses
Major tech stocks bore the brunt of the decline. Nvidia plummeted 8.8%, while Tesla, led by Elon Musk, dropped 2.8%. Retail giant Kroger also slipped 3% after CEO Rodney McMullen resigned due to an internal investigation.
Even cryptocurrency-related stocks took a hit despite Trump’s recent push for a crypto strategic reserve. MicroStrategy fell 1.8%, while Coinbase, a leading crypto exchange, saw a 4.6% decline.
International Markets React
Across global markets, reactions were mixed. China’s manufacturers reported a rush of orders ahead of the tariff hike. Meanwhile, European markets surged after a report signaled easing inflation in February, raising expectations for an upcoming interest rate cut by the European Central Bank.
- Germany’s DAX rose 2.6%
- France’s CAC 40 gained 1.1%
- Hong Kong’s Mixue Bingcheng stock soared 43% on its IPO debut
Bond Market Signals Economic Slowdown
In the bond market, the 10-year Treasury yield dropped to 4.16%, down from 4.24% before the manufacturing data release. Yields have been falling sharply since January as concerns over U.S. economic growth intensify.
Typically, lower bond yields boost stock prices by making loans cheaper and stimulating economic growth. However, in this case, falling yields reflect weaker economic expectations, leading analysts like Morgan Stanley’s Michael Wilson to warn that the market may not benefit from these shifts.
What’s Next for the Market?
The Federal Reserve could step in with interest rate cuts, but inflation concerns limit their flexibility. If economic data continues to weaken, Wall Street may brace for further market volatility in the coming weeks.
As global trade tensions escalate, investors remain uncertain about how Trump’s tariff strategy will impact the economy in the long run.
