Markets Tumble as Trump Confirms Tariffs on Mexico and Canada Will Begin Tuesday

The Dow Jones Industrial Average fell 650 points, or 1.48%, to close at 43,191, after dropping nearly 900 points earlier in the session. The broader S&P 500 slid 1.76%, while the tech-heavy Nasdaq Composite tumbled 2.64%, extending its losses to approximately 6.5% since Trump's inauguration on January 20. "Tomorrow, tariffs — 25% on Canada and 25% on Mexico," Trump declared during a White House press conference. "And that'll start. What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs."

The president emphasized that negotiations had reached an impasse, stating the two trading partners had "no room" left to avoid the levies. He framed the tariffs as a punitive measure against countries that he claims take from the U.S. economy without adequate reciprocity. Wall Street's fear gauge, the VIX volatility index, surged to its highest level this year following Trump's remarks, and CNN's Fear and Greed Index slipped into "extreme fear" territory. "Due to the uncertainty surrounding the tariffs, the stock market has erased the gains from the 'Trump bump' following the presidential election and the expected upward pressure on prices is giving investors pause," said Gustavo Flores-Macias, a professor of government and public policy at Cornell University.

Commerce Secretary Howard Lutnick suggested at the press conference that global companies can avoid tariffs by investing in U.S. production, pointing to Taiwanese chipmaker TSMC's announcement of a $100 billion investment in the United States. Investor concerns intensified after Trump posted on Truth Social about plans to implement additional tariffs on "external product[s]," potentially including agricultural imports, starting April 2. "To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd. Have fun!" Trump wrote.

The manufacturing sector is already showing signs of strain from trade uncertainty. The latest survey from the Institute for Supply Management indicated that while economic activity in manufacturing remained in expansion territory, it slowed last month. Tariff concerns dominated respondents' comments. "Customers are pausing on new orders as a result of uncertainty regarding tariffs. There is no clear direction from the administration on how they will be implemented, so it's harder to project how they will affect business," one survey participant noted.

Analysts at Goldman Sachs observed that while tariffs may boost demand for U.S.-produced goods, they will also "raise production costs for some domestic producers and will likely prompt foreign retaliation against some U.S. exports, both of which could hurt domestic production." Among individual stocks, chipmaker Nvidia was particularly hard hit, falling 8.7%. Meanwhile, the yield on the 10-year Treasury slid to 4.16%, reflecting growing concerns about economic uncertainty.

Cryptocurrency markets also retreated, with Bitcoin trading at approximately $85,600 by Monday afternoon, down 8.6% over the past day. The decline largely erased gains made after Trump announced plans for a strategic crypto reserve that would include Bitcoin. In contrast to the selloff in U.S. equities, shares of European defense companies soared to record highs as European leaders consider increasing military spending amid expectations of reduced U.S. support for Ukraine. Oil markets were also affected by the broader market turbulence, with WTI crude, the U.S. benchmark, falling 2.4% after OPEC announced plans to increase production in April.

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