US Stocks Plunge as Trump’s Tariffs on Canada, Mexico Take Effect

• U.S. stocks tumbled as Trump’s tariffs on Canada and Mexico took effect at midnight.
• The Dow plunged 650 points, while the Nasdaq saw its biggest one-day drop of the year.
• Canada vowed retaliation with $30 billion in tariffs, escalating trade tensions.

U.S. stocks tumbled on Monday as investors reacted to the looming implementation of President Donald Trump’s proposed tariffs on Canada and Mexico, set to take effect at midnight.

The Dow Jones Industrial Average plunged 650 points, or 1.48%, to close at 43,191, after falling nearly 900 points in afternoon trading before paring some losses. The broader S&P 500 dropped 1.76%, while the tech-heavy Nasdaq Composite sank 2.64%, marking its steepest one-day decline of the year. Since Trump took office on January 20, the Nasdaq has shed approximately 6.5%.

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“Tomorrow, tariffs—25% on Canada and 25% on Mexico,” Trump announced at a White House press conference. “And that’ll start. … What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”

Trump asserted that Canada and Mexico had exhausted all avenues for negotiation, framing the tariffs as a necessary measure to penalise nations he accused of unfairly benefiting from the U.S. economy. “They’re all set. They go into effect tomorrow,” he stated.

Canadian Prime Minister Justin Trudeau swiftly responded, warning that Ottawa would retaliate with tariffs on $30 billion worth of U.S. goods should Trump’s measures be enacted. “Canada will not let this unjustified decision go unanswered,” Trudeau declared in a statement.

In a separate move, Trump also signed an executive order on Monday raising tariffs on Chinese imports from 10% to 20%. The administration justified the increase as part of an effort to pressure Beijing into taking stronger action against the flow of fentanyl into the United States.

Market volatility surged following Trump’s announcements, with the Cboe Volatility Index (VIX), often referred to as Wall Street’s “fear gauge,” spiking to its highest level this year.

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“Due to the uncertainty surrounding these tariffs, the stock market has erased the gains from the ‘Trump bump’ following the presidential election, and the expected upward pressure on prices is giving investors pause,” said Gustavo Flores-Macias, a government and public policy professor at Cornell University.

Despite the downturn, some analysts remained optimistic about long-term market prospects. “For investors, 2025 can still be a positive year for stocks, but it may take all year to realise gains. And they may be modest,” said Gina Bolvin, president of Bolvin Wealth Management Group. “I’m still a bull,” she added.

The scope of Trump’s tariffs is unprecedented. The latest measures, which first took effect on February 4, have set in motion duties on $1.4 trillion worth of imported goods—more than triple the $380 billion taxed during Trump’s first term, according to estimates from the Tax Foundation.

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