Stocks fell sharply Monday afternoon after President Trump supported tariffs on imports from Canada and Mexico, dashing investors' hopes for a last-minute reprieve, strengthening concerns that drastic tariffs could collide with corporate profits and fuel inflation.
The S&P 500 saw the biggest daily decline in the index this year, down 1.8%. The technology-heavy Nasdaq has dropped by 2.6%, nearly exceeding the threshold for the index to become a “fix” defined as a sold-out of more than 10% from its recent peak. The Nasdaq is currently slightly above its mid-December high.
The market's afternoon slump will move forward with broad tariffs in two of the US's biggest trading partners, Canada and Mexico, on Tuesday, following Trump's statement at the White House on Monday. Trump also said he would impose an additional 10% tariff on goods from China, in addition to the 10% that came into effect last month.
Fearing tariffs will raise US prices, investors risk pushing the Federal Reserve, continuing to raise interest rates for longer and taking over the economy into a recession.
The sale on Monday came after the stock market already lost some of its brilliance in February. The S&P 500 fell roughly 1.4% that month as Trump administration's policy priorities and weak consumer sentiment made investors uneasy.
On Monday, the Russell 2000 SME index, which is generally exposed to economic decline and currents, fell 3.1%, further pushing it into a revision of itself. The index has dropped by more than 14% as it peaked in late November. The VIX Volatility Index, also known as the Wall Street “Fear Gauge,” rose sharply to 22 points, eased around 22 and is still above the long-term average.
Trump's comments on tariffs extended the stock market decline from the day the February reading of major manufacturing indexes became weaker than investors expected.
