Wall Street Investors Stunned After Trump Administration Kicked Off Global Trade War

Barry Adams
03 Feb, 2025
New York City

Stock market indexes dropped, bond yields advanced, and market confidence wavered after investors returned from a weekend. 

The S&P 500 index declined 1.7%, and the Nasdaq Composite dropped 2.2% in Monday's trading after the U.S. slapped tariffs on imports from its three largest trading partners. 

The U.S. imposed 25% tariffs on imports from Mexico and Canada and imposed an additional 10% tariff on manufactured goods from China. 

The move is likely to cover about $1.2 trillion, or about half of all imports, and could raise as much as $240 billion over a year. 

Tariffs are paid by the U.S. importing companies, which are generally passed on to American consumers in the form of higher prices.

The Republican Party in the past had advocated free trade and decried trade barriers and tariffs, but as the party supports higher indirect taxes on all citizens and raises government revenue to pay for tax cuts for the wealthy donors.

The U.S. imports about $1.2 trillion of goods from its three largest trading partners, and the world's largest economy has run deficits for decades with its six key trade partners—Mexico, Canada, China, the European Union, Japan, and Korea.

The U.S. has run an annual trade deficit since 1964 and rarely bothered to focus on improving its trade competitiveness, as the dollar's reserve currency status provides an advantage that no other country enjoys. 

Market confidence in the Trump administration has substantially weakened, and global financial markets are roiled from New York, Frankfurt, to Tokyo after the newly appointed presidential administration's actions are likely to start a new trade war.

Stock market indexes are likely to face a sharp selloff as investors worry about the announcements of more policies that could push the U.S. economy into a recession and stoke inflation, forcing the Federal Reserve to keep higher rates for longer. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 1.7% to 5,940.61, the Nasdaq Composite edged down 2.2% to 19,204.90, and the Russell 2000 index was down 2.5% to 2,231.23.

The yield on 2-year Treasury notes edged higher to 4.25%, 10-year Treasury notes declined to 4.51%, and 30-year Treasury bonds dropped to 4.74%.

WTI crude oil increased $1.83 to $74.36 a barrel, and natural gas prices edged higher by $0.27 to $3.32 a thermal unit.

Gold rose by $16.64 to 2,813.51 an ounce, and silver edged up by $0.06 to $31.34.

The dollar index, which weighs the US currency against a basket of foreign currencies, climbed 0.90 to 109.27 and traded at a two-year high.

 

U.S. Stock Movers 

Automobile and parts makers after the announcements of new tariffs on imports from the three largest trading partners. 

U.S. automobile production relies on a highly integrated supply chain network spanning from Mexico to Canada, and several parts cross borders multiple times before they are sold to consumers in North America. 

General Motors declined 6.5% to $46.32, Ford Motor dropped 3.7% to $9.71, Stellantis NV decreased 4.9% to $12.53, and Tesla dropped 3.6% to $390.02.

Aptiv declined 3.6% to $59.38, Avery Dennison fell 2.2% to $180.71, and Cummins Inc. decreased 3.2% to $345.15.

Chipotle Mexican Grill declined 2% to $57.31 after avocado shipments from Mexico face 25% tariffs as early as Wednesday. 

Constellation Brands declined 4% to $170.09 after the alcoholic beverage importer and distributor faced higher product costs from Mexico.