Stocks tumbled on Monday as Wall Street braced for the impact of steep new tariffs ordered by President Trump, with mounting fears the new import duties could spark a trade war that could crimp corporate profits and dampen consumer spending.
The Dow Jones Industrial Average shed 421 points, or 1%, to 44,123 in early morning trading. The broad-based S&P 500 lost 1.5%, while the tech-heavy Nasdaq composite index tumbled 1.8%.
On Saturday, Mr. Trump signed an executive order that imposes 25% tariffs on imports from Canada and Mexico, while adding an additional 10% levy on goods from China. Hours later, Canada responded with retaliatory tariffs of its own, while Mexico said it was also planning to issue tariffs on the U.S. as well, adding to the potential fallout from a trade war with two of the U.S.’ closest trading partners.
Mr. Trump’s announcement prompted some economists to project that the stiff new tariffs could dampen U.S. economic growth and cause an increase in job losses.
“This development came sooner than we anticipated in our baseline forecast and will lead us to downgrade our 2025 global forecast,” Oxford Economics wrote in a Feb. 3 research note. “The latest set of tariffs will lead to weaker GDP growth, higher unemployment, higher interest rates, and higher inflation this year in Canada, Mexico, and the U.S. than in our January baseline forecast.”
Canada initially ordered retaliatory tariffs of 25% on American imports starting Tuesday, including beverages, cosmetics and paper products worth 30 billion Canadian dollars ($20 billion).
A second list of goods was to be released soon, including passenger vehicles, trucks, steel and aluminum products, certain fruits and vegetables, beef, pork, dairy products, aerospace products and more. Those goods were estimated to be worth 125 billion Canadian dollars ($85 billion).
Mexico has so far said only that it will impose retaliatory tariffs, without mentioning any rate or products.
Automaker stocks tumble
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.
For instance, Volkswagen sources 43% of its vehicles through Mexico, General Motors 22%, and Ford 15%.
General Motors fell 5.5%, while 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 were dinged early Monday. Farm equipment maker Deere & Co. tumbled 3.1%, while Caterpillar dipped 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 still-sticky inflation that could worsen under Mr. Trump’s trade and immigration policies.
