Stock Market Update: S&P 500 and Nasdaq Drop, Dow Recovers as US Delays Mexico Tariffs
February 3, 2025 — U.S. stock markets experienced mixed performance on Monday following the Trump administration’s announcement of tariffs targeting Canada, Mexico, and China. While the tech-focused Nasdaq and broad-market S&P 500 indexes fell, the Dow Jones Industrial Average managed to claw back losses by the close of trading.
Market Reaction to Tariff News
The initial reaction to the scheduled tariffs was negative, with investors concerned about the potential economic impact of new duties on imports from key trading partners. The tariffs were set to impose a 25% duty on goods from Canada and Mexico, and a 10% duty on select Chinese products, with energy imports from Canada facing a lower 10% tariff. These measures were planned to take effect starting Tuesday.
The Nasdaq Composite (^IXIC), home to many technology companies, dropped 1.2% by market close, though it recovered from earlier steep declines. The S&P 500 (^GSPC) fell about 0.7%, while the Dow Jones Industrial Average (^DJI) was down 0.3% after bouncing off session lows.
Consumer discretionary stocks (XLY), including automakers, were notably hit amid fears tariffs would drive up costs and reduce demand. Technology stocks (XLK) also lagged behind, with major names such as Nvidia (NVDA), Apple (AAPL), and Tesla (TSLA) each losing more than 2.5% in value.
Mexico Secures Tariff Delay After Border Security Agreement
Amid these developments, President Donald Trump announced a one-month delay of tariffs on Mexican imports following a morning call with Mexico’s President Claudia Sheinbaum. Mexico agreed to deploy approximately 10,000 soldiers to the U.S. border to stem the flow of fentanyl shipments and illegal immigration, a key U.S. security concern linked to the tariff decision.
This pause provided a temporary respite for markets, sparking a minor rally as traders digested potential easing of trade tensions. However, tariffs on Canadian and Chinese imports remained scheduled to go into effect the next day.
Canadian Tariff Status in Flux Amid Diplomatic Talks
Later in the day, Canadian Prime Minister Justin Trudeau communicated with President Trump, leading to an announcement that tariffs on Canadian goods would be paused for at least 30 days. Trudeau revealed Canada’s commitment to a $1.3 billion border security enhancement plan, including new helicopters, technology upgrades, and additional personnel to combat fentanyl trafficking.
This diplomatic progress appeared to calm investor nerves about a full-scale trade conflict with Canada, which had threatened retaliation with its own counter-tariffs against roughly $107 billion in American products.
Currency and Commodities Impact
The U.S. dollar index retreated from near two-year highs reached earlier in the session, reflecting reduced trade war concerns. Meanwhile, crude oil prices, specifically West Texas Intermediate (WTI) futures, trimmed earlier gains after initially surging over 2%.
Looking Ahead
Market participants remain alert as Tuesday’s implementation deadline draws near for tariffs on Canadian and Chinese imports. The unfolding diplomatic discussions between the U.S. and its neighbors will continue to heavily influence market sentiment in the short term.
Investors are cautiously optimistic that further border security agreements and negotiations could prevent the tariff conflict from escalating, potentially stabilizing the markets in upcoming sessions.
For more detailed updates on tariffs, trade negotiations, and market movements, stay tuned to Smart Money Mindset.