Wall Street drops as Trump’s tariffs hit markets worldwide
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Updated: 9:33 AM CST Feb 3, 2025
By YURI KAGEYAMA and MATT OTT AP Business Writers
Worries about President Donald Trump’s tariffs are hurting U.S. stocks Monday as financial markets worldwide drop on concerns about a potential trade war.The S&P 500 was down 1.4% in early trading following similar losses for stock markets across Asia and Europe. The Dow Jones Industrial Average was down 435 points, or 1%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 1.8% lower.Everything from bitcoin to the Mexican peso fell, not just the stocks of U.S. companies expected to be the first to feel pain from Trump’s tariffs on goods imported from Canada, Mexico and China. On Wall Street, some of the sharpest losses hit Big Tech and other companies that could be hit hardest by higher interest rates.The fear is that Trump’s tariffs will push up prices for groceries, electronics and all kinds of other bills for U.S. households, putting upward pressure on a U.S. inflation rate that’s largely been slowing since its peak three summers ago. Stubbornly high or accelerating inflation could keep the Federal Reserve from cutting interest rates, which it began doing in September to give the U.S. economy a boost.To be sure, U.S. stock prices remain close to their all-time high, which was set less than two weeks ago. And Monday’s losses weren’t as bad as some other recent drops, such as one in December when the Fed hinted fewer rate cuts may arrive in 2025 than expected.But much of Wall Street had been hoping Trump’s talk of tariffs through the presidential campaign was just that, talk, and an opening point for negotiations with U.S. trading partners. Now that Trump has followed through, the fear is about how much retaliation will occur in what could be an escalating trade war that damages economies worldwide, including the United States.“The uncertainty at this stage is tremendous – not only of how these eventual negotiations will play out, but worries about how this is only the tip of the iceberg and more tariffs are on the horizon,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management.Traders on Wall Street are already paring expectations for how many cuts to interest rates the Federal Reserve may deliver this year, if any. Lower interest rates can encourage U.S. employers to hire more workers, while also goosing prices for investment, but the downside is they can give inflation more fuel.“Living in the Midwest, I might feel the trade war soonest and most,” said Brian Jacobsen, chief economist at Annex Wealth Management, because of how much crude oil flows over the northern U.S. border to make gasoline. “Our refiners can’t easily switch away from Canadian crude.”Crude oil prices rose, suggesting inflationary pressure may already be starting