U.S. markets dropped off sharply Tuesday after President Donald Trump slapped 25% tariffs on Mexico and Canada and another 10% duty on imports from China in an escalating trade war.
The Dow Jones Industrial Average, which tracks blue-chip industrials, fell about 1.5%, or about 670.25 points points on Tuesday adding to a 650-point drop on Monday. The broader S&P 500 eliminated all post-election gains during Tuesday’s session as it dropped about 1.2%, hitting its lowest level in four months.
The tech-focused Nasdaq Composite, which briefly traded in the green for a portion of the volatile day, closed down about 0.4%. It avoided entering correction territory.
Trump’s 25% tariffs on imported goods from Mexico and Canada took effect Tuesday, putting the U.S. on a collision course with its top trading partners as consumers worry about higher prices on a wide range of products.
Canada responded with plans to put 25% tariffs on nearly $100 billion of U.S. imports. Mexico said it would retaliate with moves to be announced Sunday.
The U.S. also put an additional 10% tariff on Chinese imports, adding to a duty imposed a month ago. China announced retaliatory tariffs on U.S. agricultural goods, and other measures against U.S. companies. China also filed a lawsuit with the World Trade Organization.
Both the U.S. Chamber of Commerce and the American Farm Bureau Federation called on Trump to change course on tariffs.
The United States-Mexico-Canada Agreement, or USMCA, governs trade between the U.S. and its northern and southern neighbors. It went into force on July 1, 2020, and Trump signed the deal. That agreement continued to allow for duty-free trading between the three countries.
U.S. goods and services trade with USMCA totaled an estimated $1.8 trillion in 2022. Exports were $789.7 billion and imports were $974.3 billion. The U.S. goods and services trade deficit with USMCA was $184.6 billion in 2022, according to the Office of the United States Trade Representative.
Tariffs are taxes on imported goods paid by the importer, which are often passed along to consumers through higher prices on the imported products.
