President Donald Trump’s announcement of tariffs on Canada, Mexico, and China has caused concern among investors, leading to a drop in high-risk assets on Wall Street. The tariffs are expected to have wide-reaching implications, affecting stock prices and the broader economic landscape. Canada and Mexico have vowed retaliation, escalating fears of a trade war.
A trader at the New York Stock Exchange described the atmosphere as tense, noting the potential for further market instability. Analysts are closely watching how these tariffs will impact international trade dynamics and domestic economic indicators. Line charts showcase the share of total trade of top U.S. trade partners, indicating potential impact zones.
Investors anticipate stock market declines after Canada and Mexico swiftly retaliated against the new U.S. tariffs. Trading on IG’s weekend markets indicates shares are likely to fall on Monday, with technology stocks expected to be significantly affected. The Nasdaq index is on track to fall 1.2% at the start of Monday trading, while the UK’s FTSE 100 is projected to drop by 0.6%.
IG analyst Tony Sycamore noted that the surprise for markets is the immediate retaliation by Canada and Mexico, and the possibility of others, such as China and the EU, following their lead.
Wall Street braces for tariff impact
Canada responded with a 25% tariff phased in across C$155bn worth of American products, while Mexico’s President instructed her economy minister to implement tariff and non-tariff measures.
China’s commerce ministry pledged to file a lawsuit against the U.S. at the World Trade Organization. Analysts predict significant market reactions due to tariffs on Canadian and Mexican oil. Chris Weston of Pepperstone noted that Trump’s announcement could lead to “some derisking” in the markets and higher volatility on foreign exchanges.
Bitcoin dropped to a one-week low of about $99,078 on Sunday, and South Korea’s acting president ordered government agencies to closely monitor any impact from the new tariffs on domestic firms and the South Korean economy. Trump denied that the tariffs would push up prices, but economists expect the costs to be passed on to U.S. consumers. Lawrence Summers, a Harvard economics professor and former U.S. Secretary of the Treasury, criticized the tariffs as “inexplicable and dangerous.”
Stocks gave up earlier gains Friday as Trump’s plan to implement the tariffs was set to take effect Saturday.
All three major indexes were down for the day, with the Dow Jones Industrial Average declining 340 points, or 0.8%. Leading the swing were Apple and Nvidia, both with significant dealings in China. Nvidia’s market value has tanked $553 billion since last Friday, largely driven by DeepSeek’s introduction of a cheaper AI model.
Despite Nvidia’s massive losses and a down Friday, this month is shaping up as a historically strong January for the market, with the Dow up nearly 5% and the S&P almost 3%.
