Wall Street Faces Steep Losses as Trade War Escalates
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March 4, 2025 – STOCKS endured a rough session on Wall Street today, continuing a downward trend as escalating trade tensions between the United States and its key partners led to significant losses across major indices. Notably, the S&P 500 has now wiped out all gains it accumulated since Election Day, reflecting growing investor concerns about the ramifications of new tariffs imposed by the Trump administration.
Tariffs Imposed and Retaliation Announced
The Trump administration initiated a new round of tariffs starting today, targeting imports from Canada and Mexico, while also doubling previously established tariffs on Chinese imports. Following these announcements, all three countries quickly retaliated, intensifying fears of a slowdown in the global economy. Canada indicated it would impose tariffs on over $100 billion of American goods, while Mexico also announced plans for tariffs on U.S. products. China responded by planning extra tariffs on key U.S. agricultural products such as chicken, pork, soy, and beef.
With this escalation, the S&P 500 fell by 1.2%, with more than 80% of its constituent stocks closing in the red. The Dow Jones Industrial Average experienced a sharper decline of 1.6%, while the tech-heavy Nasdaq composite dipped by 0.4%. During trading, the Nasdaq briefly fell into correction territory, marking a 10% decrease from its most recent closing high. However, stocks such as Nvidia and Microsoft managed to stabilize some of those losses.
Investors React to Economic Concerns
Financials were particularly hard-hit, with JPMorgan Chase’s shares dropping by 4% and Bank of America losing 6.3%. Analysts expressed alarm over the effects of tariffs on consumer prices, potentially stoking inflation and impacting economic growth. "The markets are having a tough time even setting expectations for what this trade war could look like," remarked Ross Mayfield, an investment strategy analyst at Baird. “This is clearly a level step higher than anything we saw during Trump’s first term.”
As retailers begin reporting their latest financial results, warnings about the impact of tariffs are increasing. Target reported earnings that surpassed Wall Street forecasts but warned of “meaningful pressure” on profits due to rising tariffs, leading to a 3% drop in their stock. Best Buy experienced a dramatic 13.3% decline after providing a weaker-than-expected earnings forecast and highlighting concerns over product costs due to the tariffs.
Economic Outlook Turns Gloomy
The recent stock market slump has erased the gains attributed to expectations surrounding pro-business policies that emerged post-election. Many investors are on edge about potential increases in consumer prices, which could hinder spending and contain inflation. Current economic indicators suggest households are becoming increasingly pessimistic about inflation, which has historically driven U.S. economic growth.
Wall Street had anticipated further interest rate cuts from the Federal Reserve throughout 2025, but growing uncertainty surrounding tariffs has prompted a more cautious approach. The Fed is now expected to keep rates steady in its upcoming March meeting after raising them to a two-decade high to combat inflation, which remains above the central bank’s target.
Bond Market Reaction
In light of the volatile stock market, Treasury yields experienced mixed movements. The yield on the 10-year Treasury rose slightly to 4.20%, still significantly lower than rates observed just last month. Observers note that the ongoing tariff situation contributes to concerns about inflation levels and the overall strength of the economy. In contrast, the yield on the 2-year Treasury remained stable at 3.94%.
Closing Figures
As trading wrapped up on Wall Street, the S&P 500 fell by 71.57 points, settling at 5,778.15. The Dow Jones dropped 670 points, closing at 42,520.99, and the Nasdaq composite lost 65.03 points, ending the day at 18,285.16. With the economic landscape shifting rapidly, traders and investors alike are bracing for what could be a lengthy and unpredictable period of tariff-induced turmoil.
Contributors to this report include Matt Ott and Elaine Kurtenbach from the Associated Press.
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