Late Monday, Wall Street traders rushed to unload stocks after President Donald Trump confirmed that his threatened tariffs on Canada and Mexico would take effect early Tuesday. In recent reports, China has rejected additional tariffs, and Canada is striking back With Tariffs on $107 Billion worth of US products.
The Dow Jones Industrial Average sank roughly 800 points, or 1.8%. The S&P 500 shed 2.1% and headed toward its worst day of 2025, while the Nasdaq Composite tumbled 3%. Nvidia led the tech rout, falling more than 9% on separate concerns about its global supply chain.
Investors had hoped for a last-minute reprieve, but Trump, speaking at the White House with Commerce Secretary Howard Lutnick, announced there was “no room left for Mexico or for Canada.” He added that “tomorrow, tariffs, 25% on Canada and 25% on Mexico, and that will start.” The president also confirmed an extra 10% tariff on China—adding to the 10% increase he recently instituted—citing a need to protect American interests.
The sudden market downturn erased early-year gains that had come from investor optimism about deregulation and expected tax cuts under the Trump administration. The Dow, which climbed about 5% at its peak this year, now sits just 1% higher than its level at the start of 2025.
The S&P 500’s 2.1% slide signals renewed investor anxiety, especially in industrial and consumer goods sectors, which are highly exposed to trade tensions. The tech-heavy Nasdaq’s 3% drop is linked both to rising tariffs and to a separate drag on chipmakers led by Nvidia. The chipmaker’s stock sank as worries about restricted access to critical supply chains deepened.
China rejects additional U.S. tariffs
China’s Ministry of Commerce released a statement Tuesday saying it “firmly rejects” the increased tariffs on Chinese goods and will enact countermeasures. The U.S. has imposed a new 10% levy on Chinese imports, bringing total recent tariff increases to 20%.
Nomura’s Chief China economist Ting Lu estimates that the average effective U.S. tariff rate on Chinese goods will hit 33%, up from 13% before Trump began his latest term in January.
Beijing’s earlier reprisals included raising duties on certain U.S. energy imports and placing two American companies on an unreliable entities list. China has also hinted at slapping tariffs on U.S. agricultural products. As of 2023, U.S. exports of items like soybeans to China accounted for $22.3 billion, or 1.2% of total American goods exports, according to Allianz Research. Oil and gas ranked second at 1%, worth $19.3 billion, and pharmaceuticals followed at $15.6 billion.
Canada Strikes Back With Tariffs on $107 Billion in U.S. Goods
Hours after Trump pledged to move forward with tariffs on Tuesday, Canadian Prime Minister Justin Trudeau unveiled a counter-tariff package worth a total of about $107 billion. Speaking from Ottawa on Monday night, Trudeau said, “Canada will not let this unjustified decision go unanswered.”
The retaliation includes two phases: a first round of 25% tariffs on roughly C$30 billion ($20.6 billion) worth of U.S. goods and a second stage in three weeks that slaps similar duties on C$125 billion (about $86 billion) of additional items. Cars, trucks, steel, and aluminum are specifically named in the second round. Trudeau emphasized that these measures will persist “until the U.S. trade action is withdrawn.”
Markets reacted sharply. Canada’s S&P/TSX Composite Index slipped 1.5%—its worst session since December 18—while the Canadian dollar weakened. Traders in overnight swaps raised expectations that the Bank of Canada will cut interest rates by 25 basis points at its March 12 meeting, pricing in nearly an 80% chance, up from near 50% just days earlier.
The Bank of Canada recently cautioned that a prolonged tariff war could slash output by nearly 3% over two years and “wipe out growth” over that period. Economists say the uncertainty alone disrupts supply chains, reduces consumer spending, and forces businesses to reconsider hiring plans.
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