The U.S. stock market is facing a reckoning with the arrival of President Donald Trump‘s latest tariffs. With fresh declines on Tuesday, the benchmark S&P 500 ended down about 6% from its February 19 all-time closing high, and is in negative territory for the year. The tech-heavy Nasdaq Composite finished 9.4% below its mid-December closing high, at one point sinking over 10% from that peak.
Tariffs are exacerbating the headache for investors already worried that a series of weakening U.S. economic reports is raising concerns about growth. The arrival of the tariffs “brings with it uncertainty as far as the earnings of some companies as well as the overall direction of the U.S. economy,” said Peter Tuz, president of Chase Investment Counsel.
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“I think there was some hope that before they were implemented there would be deals struck with the affected parties and we wouldn’t see them.”Trump’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%.The levies on foreign imports are widely seen by analysts as likely to increase inflation and to cut into corporate profits.
Tariffs could pose challenges for companies by complicating supply chains or driving costs higher, some of which would be expected to be passed onto consumers in the form of higher prices, investors have said. Morgan Stanley estimates that 25% tariffs on Mexico and Canada and 10% tariffs on China through 2026 could collectively reduce earnings for the S&P 500 by 5% to 7%, the bank’s equity strategists said in a note on Monday.
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Nationwide Chief Economist Kathy Bostjancic said in a note that the tariffs could detract at least 1 percentage point from gross domestic product growth and raise inflation by 0.6 percentage points this year, if there are proportionate retaliatory tariffs by the targeted countries and the levies are maintained throughout 2025.
ECONOMIC HEADWINDS
Beyond the levies in focus on Tuesday, Trump recently also floated a reciprocal tariff on European goods. Indeed, European shares retreated from record highs as investors worried about the hit to global growth and whether similar levies could be imposed on Europe.”Trump’s tit-for-tat approach has heightened fears of a global trade war,”
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