Dow Plunges 670 Points as Trump’s Tariffs Spark Fears of Global Trade War

The Dow dropped nearly 670 points (1.55%) after President Trump imposed tariffs on Canada and Mexico, raising fears of a global trade war. The S&P 500 fell 1.22%, and the Nasdaq Composite slid 0.35%, briefly dipping into correction territory, while market volatility surged with the VIX hitting its highest level this year. The S&P 500 erased all gains since Trump’s reelection, and global markets also declined, with major losses in Europe and Asia. In response, China announced tariffs on U.S. agricultural products, while Canada and Mexico vowed countermeasures.

The U.S. dollar weakened, while gold prices rose as investors sought safe-haven assets. Economic concerns intensified as inflation remained high, layoffs increased, and consumer confidence plummeted. Analysts believe the tariffs may be a negotiation tactic rather than a long-term policy shift, but uncertainty remains. Some investors see opportunities in buying the dip, though caution prevails. Meanwhile, Trump is set to address Congress as economic fears grow, with a projected 2.8% GDP contraction adding to concerns.

Dow Plunges 670 Points as Trump’s Tariffs Spark Fears of Global Trade War

The Dow Jones Industrial Average plunged nearly 700 points on Tuesday as U.S. stocks experienced heightened volatility following President Donald Trump’s decision to impose tariffs on Canada and Mexico. The move fueled concerns of a global trade war, with both nations vowing to retaliate. Analysts warned that these steep tariffs could trigger an economic downturn reminiscent of the Great Depression, with Andrew Wilson of the International Chamber of Commerce cautioning that this could mark the start of a dangerous downward spiral.

Despite recovering some losses earlier in the day, the Dow closed 670 points (1.55%) lower at 42,521, while the S&P 500 fell 1.22% and the Nasdaq Composite declined 0.35%. Market strategist Steve Sosnick noted that the quick rebound in stocks suggests many traders still see market dips as buying opportunities. However, volatility surged, with the VIX index reaching its highest level this year, while the S&P 500 erased all gains since Trump’s reelection.

Global markets also reacted negatively to the tariff announcement, with Europe’s STOXX 600 dropping 2.14%, Germany’s DAX falling 3.54%, Japan’s Nikkei 225 sliding 1.2%, and Hong Kong’s Hang Seng down 0.28%. Chris Zaccarelli of Northlight Asset Management stated that markets were beginning to accept that Trump’s tariff threats were not just a negotiation tactic. The U.S. dollar weakened to its lowest level since December, while gold futures rose as investors sought safe-haven assets. Currency markets showed mixed reactions, with the Mexican peso slightly depreciating and the Canadian dollar seeing modest gains. Analyst Lee Hardman suggested this indicated some optimism that the tariffs might not be permanent.

The U.S. imposed a 25% tariff on Canadian and Mexican imports in addition to raising tariffs on Chinese goods to 20%, with the Trump administration citing efforts to curb fentanyl trafficking. However, these tariffs could have a severe impact on American consumers, as inflation remains above the Federal Reserve’s 2% target, layoffs continue to rise, and consumer confidence declines.

China swiftly responded by imposing tariffs on U.S. agricultural goods, including chicken, pork, and beef. Canadian Prime Minister Justin Trudeau announced immediate retaliatory tariffs of 25% on C$30 billion ($20.7 billion) worth of U.S. goods, with an additional C$125 billion ($86.2 billion) in tariffs to follow in 21 days. Calling Trump’s decision “very dumb,” Trudeau vowed not to back down. Meanwhile, Mexican President Claudia Sheinbaum stated that her government would impose retaliatory tariffs by Sunday, warning of widespread economic repercussions.

While Trump’s aggressive trade stance was well known, many investors had assumed his tariff threats were merely a negotiation strategy. As the deadline neared, concerns over an all-out trade war triggered Monday’s sharp selloff, with the Dow shedding 650 points and the S&P 500 experiencing its worst session since December. Clark Geranen of CalBay Investments suggested that these tariffs may still be part of a larger negotiation tactic rather than a long-term policy shift, but investors remain cautious. LPL Financial’s George Smith urged perspective, noting that U.S. stocks had reached record highs just last week and that historically, buying during market dips has proven successful.

As economic fears grow, Trump was set to address Congress later Tuesday with a speech titled “Renewal of the American Dream.” His address comes as markets have wiped out all gains from his presidency, and the Federal Reserve Bank of Atlanta projects a potential 2.8% contraction in U.S. GDP. Investor sentiment remains deeply pessimistic, with CNN’s Fear and Greed Index showing “extreme fear” dominating the markets for the sixth consecutive day.