Market Volatility Spikes as Trump Increases Tariffs on Canadian Metals
The Dow Jones Industrial Average took a hit on Tuesday, dropping after President Donald Trump announced further tariffs on Canadian steel and aluminum entering the United States.
The index of 30 significant stocks fell by 297 points, equivalent to a 0.7% decline. Meanwhile, the S&P 500 saw a slight drop of 0.2%, even as the Nasdaq Composite demonstrated resilience by trading 0.4% higher.
In a Truth Social update, Trump declared that tariffs on steel and aluminum would rise to 50% from the previous 25%, effective from Wednesday. This decision marks the latest in a series of escalating trade policies that have heightened fears of a potential U.S. recession. The administration’s imposition of tariffs on Canadian, Mexican, and Chinese imports has led to notable setbacks in the stock market.
The Nasdaq Composite has slid into correction territory, now more than 10% down from its peak in late 2024, while the S&P 500 remains about 9% below its February all-time high.
On Monday, the Nasdaq experienced its most severe decline since September 2022, plummeting 4%. The Dow, comprising 30 prominent stocks, suffered a nearly 900-point loss, closing below the 200-day moving average for the first time since November 1, 2023.
This downward spiral prompted Citigroup to downgrade its rating for U.S. stocks from overweight to neutral, citing a “pause in U.S. exceptionalism” as the cause. Adding to economic anxiety, Delta Air Lines issued revised guidance, lowering its earnings outlook due to weakening U.S. demand, which triggered an 8% dip in its stock.
“The administration seems willing to endure some discomfort in pursuit of trade objectives that aren’t purely economic,” noted Ross Mayfield, an investment strategist at Baird. “I don’t believe we’re on the brink of a recession, but perhaps we’re approaching a growth slowdown or a scare. Non-recessionary sell-offs typically aren’t as prolonged or severe as those during recessions.”
When questioned about the chances of a recession, Trump described the economic situation in a Sunday Fox News interview as “a period of transition.” These comments came after Treasury Secretary Scott Bessent informed CNBC on Friday about a possible “detox period” as the administration cuts federal expenditure.
Investors are keenly awaiting the release of February’s consumer price index and producer price index reports, expected on Wednesday and Thursday morning, respectively. These are crucial indicators of the U.S. economy’s health.
“It’s critical that we don’t experience an unexpected rise in CPI because the Fed currently has sufficient room to cut rates and stimulate demand if the economy shows substantial slowing,” added Mayfield. “However, they can only act if they believe inflation expectations and rates are firmly positioned.”