Markets Plunge as Trump Tariffs Trigger Global Trade War

U.S. stock markets have tumbled for a second consecutive day as President Donald Trump’s newly implemented tariffs on major trading partners sparked fears of a global trade war and potential economic slowdown. The Dow Jones Industrial Average dropped 670.25 points on Tuesday, or 1.55%, adding to Monday’s plunge of nearly 650 points, as investors grappled with the potential economic fallout from the escalating trade tensions.

The market decline accelerated after Trump imposed 25% tariffs on Canada and Mexico that took effect at midnight, while also implementing an additional 10% tariff on Chinese goods. The S&P 500 lost 1.22% to close at 5,778.15, while the Nasdaq Composite fell 0.35% to 18,285.16, according to CNBC.

Trading Partners Retaliate Swiftly

International reaction to the tariffs was immediate and confrontational. China announced retaliatory tariffs of up to 15% on various U.S. products, while Canada’s Prime Minister Justin Trudeau announced a matching 25% levy on U.S. goods, prompting Trump to threaten even higher tariffs in response. Mexico’s President Claudia Sheinbaum stated that her country would announce its own retaliatory measures this weekend.

The tit-for-tat escalation has heightened concerns about disruptions to global supply chains and increased costs for both businesses and consumers. Companies with significant imports or international operations saw their shares hit particularly hard, with automakers GM and Ford dropping more than 4% and nearly 3%, respectively.

Chipotle, which sources about half of its avocados from Mexico, slipped 2%. Target shed 3% after its CEO warned that prices for some produce would increase in the coming days as a direct result of the tariffs, as reported by CNBC.

Market Correction Deepens

The market turmoil continued into Thursday, with the Nasdaq entering correction territory, defined as a drop of 10% from recent highs. Despite Trump announcing a nearly one-month tariff delay on products from Mexico and Canada covered by the USMCA free trade treaty, investor confidence remained shaken.

According to CNN, the Dow closed lower by 428 points, or 0.99% on Thursday. The S&P 500 fell 1.78% and the Nasdaq Composite slid 2.61%. The Dow is now down almost 3% on the week, on track for its worst week since March 2023, while the S&P 500 and Nasdaq are both facing their worst week since September 2024.

“I’m calling it a conditional correction,” said Sam Stovall, chief investment strategist at CFRA Research. “It’s really based on one condition: By how much Trump is going to retain the tariffs.” This sentiment reflects the market’s uncertainty about the duration and intensity of the trade conflicts.

Economic Concerns Intensify

The tariff-induced market volatility comes amid growing concerns about the U.S. economy’s health. Recent economic data has shown signs of weakness, and Thursday’s report from Challenger, Gray & Christmas revealed that U.S.-based employers announced plans to slash 172,017 jobs last month—a 103% increase from January and the highest February total since 2009.

Jeffrey Roach, chief economist at LPL Financial, warned in a note that “tariff-induced inflation amid slower growth could bring the economy dangerously close to stagflation.” This economic scenario, characterized by high inflation combined with slow growth and rising unemployment, is particularly concerning to investors and policymakers alike.

The U.S. dollar index, which measures the dollar’s strength relative to six other currencies, fell to its lowest level since November—signaling a weakening outlook for U.S. economic growth. Investors now anxiously await Friday’s monthly jobs report from the Bureau of Labor Statistics for further insights into the economy’s condition.

Technology Sector Faces Added Pressure

The tech-heavy Nasdaq has experienced particularly steep losses, with AI-focused companies facing additional challenges. Marvell Technologies, a chipmaker, fell by almost 20% after posting mixed earnings results. Other tech giants including Nvidia and Palantir also declined significantly.

Adding to the sector’s challenges, Chinese tech giant Alibaba announced its own AI model on Thursday, increasing competition in the artificial intelligence space. This development has raised questions about whether the AI boom in the U.S. justifies the substantial investments being made, according to CNN.

Rob Haworth, a senior investment strategist at US Bank Wealth Management, summed up the market sentiment: “Eventually, that uncertainty is just going to weigh too much on business decisions and those forward prospects for earnings growth.” He added that if economic data continues to weaken, market concerns will likely intensify.

Trump’s Market Gains Erased

With this week’s steep declines, the S&P 500 has now fallen below where it closed on Election Day in November, erasing the so-called “Trump bump” that followed his reelection victory. The Nasdaq has fallen more than 7% since Trump took office in January, and the S&P 500 is down more than 4%.

Market participants are closely monitoring statements from the administration for any indication of policy adjustments. Commerce Secretary Howard Lutnick told CNBC on Thursday that the president would likely announce a one-month tariff delay on products covered by the USMCA, but the mixed messaging from the White House has only added to investor uncertainty.

As the trading week comes to a close, investors remain on edge about the potential long-term economic impact of the escalating trade disputes. The sharp market reaction suggests that even temporary tariffs could have lasting consequences for global trade relationships and economic growth prospects.