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The stock market dropped sharply on Monday after Donald Trump said he would impose his threatened trade tariffs on Mexico and Canada.
The Dow Jones Industrial Average fell by as much as 2.5 percent compared to its peak near the start of the day before recovering marginally, while the S&P 500 — reflecting the share prices of the USA’s 500 biggest publicly traded companies — dropped by as much as 2.8 percent.
The Nasdaq Composite, which is slanted toward tech companies and was already depressed by a separate drop in share prices for the chipmaker Nvidia, fell by as much as 3.8 percent.
Investors had hoped Trump might relent in his promise to penalize imports from the nation’s two biggest trading partners, both of which had offered concessions on border security and fighting the illegal drug trade.
But on Monday, answering questions from reporters at the White House, Trump said there was “no room left for Mexico or for Canada. The tariffs, they’re all set; they go into effect tomorrow,” he added.
“Just so you understand, vast amounts of fentanyl have poured into our country from Mexico, and as you know also from China … it comes in from Canada, and it comes in from Mexico, and that’s a very important thing to say,” Trump said.
The President also said that he would impose an extra 10 percent tariff on China, on top of the previous 10 percent tariff he introduced last month.
Tariffs are taxes on imported goods from a certain foreign country.
High tariffs were once common across the world, but have fallen out of favor as more countries have embraced free trade policies.
Though Trump has repeatedly insisted otherwise, tariffs are paid by the domestic entity that imports the goods — which is usually a U.S. company — and their cost is often passed on to the final consumer in the form of higher prices.
Monday’s drops in the Dow Jones Average and the S&P 500, while perhaps temporary, more or less erased their increase over the past few months, setting them back to the same level as immediately after the 2024 presidential election.
While many on Wall Street have reacted to Trump’s presidency with enthusiasm, some analysts are worried that the U.S. economy is entering a period of damaging turbulence due to his policies.
Retail sales across the U.S. fell by more than Wall Street had expected between December and January, at 0.7 percent compared to the predicted 0.2 percent. One widely respected measure of consumer confidence suffered its worst drop since August 2021.
