U.S. Stocks Plunge as Trump’s Tariff Announcement Shakes Markets

U.S. stocks took a significant tumble on Monday, erasing more of the gains made since President Donald Trump’s election in November. The drop came after Trump announced that tariffs on imports from Canada and Mexico would take effect within hours, dashing hopes that he might take a softer approach on global trade. The S&P 500, a key barometer of the U.S. stock market, fell by 1.8%, reducing its post-election gains to just over 1% from a peak of more than 6%. The Dow Jones Industrial Average plummeted 649 points, or 1.5%, while the Nasdaq composite, which is heavily weighted with tech stocks, dropped 2.6%.

The market’s decline followed a series of weaker-than-expected economic reports, including data on U.S. manufacturing, which showed that activity was still growing but at a slower pace than forecast. Additionally, manufacturers reported a contraction in new orders, raising concerns about the impact of Trump’s tariff policies on the economy. The announcement also came amid growing worries about inflation and the potential fallout from trade tensions, which have been weighing on investor sentiment.

Economic Concerns Grow as Tariffs Take Hold

The latest manufacturing data painted a mixed picture. While overall activity was still growing, the slowdown in new orders and ongoing destaffing at many companies highlighted the operational challenges posed by the new tariff policy. Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee, noted that demand had eased, production had stabilized, and businesses were grappling with the “first operational shock” of the tariffs.

These developments have added to the growing concerns about the U.S. economy’s strength. After a strong run in January, driven by better-than-expected corporate earnings, the market began to falter as weaker economic data emerged. Consumer sentiment has also taken a hit, with households becoming increasingly pessimistic about inflation due to the threat of tariffs. The uncertainty surrounding Trump’s trade policies has left investors on edge, as they struggle to predict how the administration will proceed.

Wall Street’s Rollercoaster Ride Continues

The market’s recent volatility has been particularly punishing for some of the formerly high-flying sectors. Tech stocks, which had been a driving force behind the market’s rally, were among the biggest losers on Monday. Nvidia, a leader in the semiconductor industry, plunged 8.8%, while Elon Musk’s Tesla dropped 2.8%. Other areas of the market, such as cryptocurrency-related stocks, also took a hit. MicroStrategy, a company known for its significant investments in Bitcoin, fell 1.8%, and Coinbase, a major crypto trading platform, slid 4.6%.

The sell-off was not limited to tech, however. Kroger, the grocery chain, fell 3% after its Chairman and CEO Rodney McMullen resigned following an internal investigation into his personal conduct. The broad-based decline underscored the nervousness in the market, as investors struggled to assess the potential fallout from the tariffs and the broader economic landscape.

Global Markets React to U.S. Trade Moves

While U.S. stocks were battered, markets outside the country fared better. In China, manufacturers reported an uptick in orders for February, as importers rushed to beat higher U.S. tariffs. Meanwhile, Beijing was reportedly considering ways to retaliate against the tariffs, which could escalate the trade tensions further. Trump had imposed a 10% tariff on Chinese imports, set to rise to 20% on Tuesday, and also ended the “de minimis” loophole that had exempted imports worth less than $800 from tariffs.

In Hong Kong, the stock market saw a standout performer in Mixue Bingcheng, a Chinese bubble tea chain, which soared 43% on its $444 million debut. The company, which claims to be the world’s largest food retail chain with over 45,000 outlets, benefited from a broader rise in the Hang Seng index, which climbed 0.3%. European markets also saw gains, with Germany’s DAX surging 2.6% and France’s CAC 40 jumping 1.1%, as inflation eased in February.

Bond Market Reflects Economic Worries

The bond market also reflected the growing concerns about the U.S. economy. The yield on the 10-year Treasury note fell to 4.16% from 4.24% before the manufacturing report was released, continuing a sharp decline from its January high of nearly 4.80%. Typically, falling Treasury yields can boost stock prices by making borrowing cheaper, but Morgan Stanley strategists led by Michael Wilson cautioned that the recent drop in yields was driven by softer economic growth expectations, which could offset any potential benefits for the stock market.

The Federal Reserve usually cuts interest rates to support the economy during slowdowns, but with inflation worries lingering, the central bank may have less room to maneuver. This uncertainty has left investors questioning whether the Fed can provide the kind of stimulus needed to shore up the economy if growth continues to weaken.

A Rocky Road Ahead for Global Trade and Markets

The latest market turmoil highlights the challenges posed by Trump’s tariff policies and the unpredictable nature of global trade negotiations. While the president had delayed the tariffs once before to allow for more talks, his decision to move forward with the levies on Canada and Mexico has raised fears of further disruptions to global supply chains and higher costs for consumers.

As the markets continue to grapple with these uncertainties, investors will be closely watching for signs of how the U.S. economy and corporate earnings will hold up in the face of these headwinds. The coming weeks and months will be critical in determining whether the recent sell-off is a temporary blip or the start of a more prolonged downturn. For now, the mood on Wall Street remains jittery, as traders and investors seek clarity on the path forward for U.S. trade policy and its implications for the global economy.