Before Monday’s market open, stocks plunged in response to President Donald Trump’s announcement of new tariffs on major US trade partners such as China, Canada, and Mexico.
The Dow Jones Industrial Average tumbled by 560 points, equivalent to a 1.27% decline, while the S&P 500 fell by 95 points, or 1.6%.
The Nasdaq dropped nearly 400 points—a 1.95% decrease—and the Russell 2000, which tracks small-cap stocks, declined by 52 points, or 2.3%.
Investor sentiment was rattled as the Cboe Volatility Index spiked briefly above 22 before stabilizing near 19, indicating growing market unease.
Trump’s decision to impose tariffs on imports from Canada, Mexico, and China has stirred concerns about potential impacts on inflation and economic growth, intensifying fears of a global trade conflict.
Companies with supply chains linked to North America have been particularly affected by these new duties.
General Motors’ shares plunged 5.6%, while Ford’s stock dropped by 4%. Suppliers such as Aptiv and Avery Dennison also suffered, with declines of 5% and 2% respectively.
Other firms felt the impact as well—Constellation Brands, which imports alcohol from Mexico, saw a 5% decline, and Chipotle, dependent on Mexican avocados, slipped by 3%. Even apparel companies like Nike and Lululemon experienced losses.
On the flip side, domestic steel manufacturers benefited from the policy shift; Nucor’s stock rose 2%, and Steel Dynamics increased by nearly 4% as investors anticipated a boost in local steel demand.
Global markets reacted swiftly to the news.
European equities were hard hit, with Germany’s DAX index dropping nearly 2%.
In the cryptocurrency arena, Bitcoin fell from over $102,000 to around $95,000, and Ether lost 11% of its value.
At the same time, the US dollar strengthened, with the ICE US Dollar Index jumping almost 1%, while energy prices were also affected by the new tariffs.
West Texas Intermediate crude oil climbed 2% to $74.20 per barrel, and Brent crude edged up by 1% to $76.42 per barrel.
The tariffs announced on Saturday impose a 25% duty on goods from Mexico and Canada, and a 10% charge on imports from China.
However, energy imports from Canada are subject to a slightly reduced 10% tariff.
In retaliation, Canada has implemented its own measures, and Mexico has indicated it might pursue similar actions against US imports.
China, meanwhile, has declared its intention to challenge the tariffs at the World Trade Organization, and Trump hinted that additional tariffs on European Union goods could be forthcoming.
European Union officials have warned that they will respond strongly if further tariffs on European imports are enacted.
Economists and analysts have voiced significant concern over these developments.
A Goldman Sachs report noted that while the immediate economic effects of the tariffs might be limited, the broader consequences could be substantial.
The report cautioned that these measures might deepen worries about future trade policy risks and provoke retaliatory actions from affected nations.
Market strategists have stressed that investors need to take the administration’s tariff plans seriously. According to Wolfe Research, if the change in policy expectations is rapidly reflected in market pricing, significant volatility could occur in the coming days.
The timing of the tariff announcement is notable as it coincides with a key earnings period, with more than 120 S&P 500 companies set to release their quarterly reports. Among those scheduled to report this week are high-profile names like Alphabet, Amazon, and Palantir, as well as consumer brands such as Disney and Mondelez.
Additionally, the upcoming nonfarm payrolls report, expected on Friday, is projected by Dow Jones analysts to show an addition of 175,000 jobs last month.
Despite the recent turbulence, the markets closed January on a positive note. The S&P 500 advanced by 2.7%, the Nasdaq Composite grew by 1.6%, and the Dow Jones Industrial Average led with a 4.7% monthly gain.
With trade disputes intensifying and market volatility persisting, analysts foresee continued uncertainty in the weeks ahead. Future market trends will largely depend on further trade policy developments, corporate earnings results, and key economic data releases.
Investors remain alert, closely watching Washington’s next moves as they prepare for the potential economic fallout from this latest round of tariffs.
{Matzav.com}
That’s it. The wheels are coming off. America will never be the same.