The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to see further downside after coming under pressure over the course of the previous session.
Concerns about a global trade war are likely to weigh on Wall Street after President Donald Trump’s tariffs on imports from Canada, Mexico and China took effect.
The White House said Trump is proceeding with implementing previously paused 25 percent tariffs on Canada and Mexico to combat the extraordinary threat to U.S. national security posed by unchecked drug trafficking.
Trump also increased the tariff on Chinese imports to 20 percent from 10 percent, claiming the country has not taken adequate steps to alleviate the illicit drug crisis.
Canada responded by announcing 25 percent retaliatory tariffs on $107 billion worth of U.S. imports, while Mexican President Claudia Sheinbaum said her government has made “contingency plans” to respond to the new tariffs.
China also said it would impose additional tariffs of 10-15 percent on several agricultural goods, including soybeans, corn, dairy and beef.
“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power,” said Russ Mould, investment director at AJ Bell.
“Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war,” he added. “Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.”
After showing a lack of direction early in the session, stocks moved sharply lower over the course of the trading day on Monday. The major averages all showed significant moves to the downside, with the tech-heavy Nasdaq plunging to a four-month closing low.
The major averages climbed off their worst levels going into the close but remained firmly negative. The Nasdaq dove 497.09 points or 2.6 percent to 18,350.19, the S&P 500 tumbled 104.78 points or 1.8 percent to 5,849.72 and the Dow slumped 649.67 points or 1.5 percent to 43,191.24.
The substantial weakness that emerged on Wall Street came amid concerns about the economic impact of President Donald Trump’s proposed tariffs.
During an appearance on Fox News over the weekend, Commerce Secretary Howard Lutnick described the proposed 25 percent tariffs on imports from Mexico and Canada as “fluid” but said the additional 10 percent tariff on imports from China is “set.”
Trump later clarified that the 25 percent tariffs on imports from Mexico and Canada will take effect on Tuesday and reciprocal tariffs on other U.S. trade partners will be imposed on April 2nd.
On the U.S. economic front, the Institute for Supply Management released a report showing its reading on U.S. manufacturing activity edged slightly lower in February but still indicated growth in the sector for the second straight month.
The ISM said its manufacturing PMI slipped to 50.3 in February after rising to 50.9 in January, although a reading above 50 still indicates growth. Economists had expected the index to dip to 50.5.
The report also said the prices index surged to 62.4 in February from 54.9 in January, reflecting the largest month-over-month increase since January 2024.
“Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery stoppages and manufacturing inventory impacts,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
He added, “Although tariffs do not go into force until mid-March, spot commodity prices have already risen about 20 percent.”
A separate report released by the Commerce Department showed construction spending in the U.S. unexpectedly edged modestly lower in the month of January.
Computer hardware stocks extended the sharp pullback seen over the past couple weeks, dragging the NYSE Arca Computer Hardware Index down by 4.2 percent to its lowest closing level in a month.
A steep drop by the crude oil also weighed on oil producer stocks, as reflected by the 4.1 percent nosedive by the NYSE Arca Oil Index. The index ended the session at a two-month closing low.
Semiconductor stocks also moved sharply lower over the course of the session, resulting in a 4.0 percent slump by the Philadelphia Semiconductor Index.
Networking, airline and retail stocks also saw considerable weakness on the day, moving lower along with most of the other major sectors.
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