Stock Market Update: S&P 500, Nasdaq Dip While Dow Holds Steady After Trump’s Tariff Developments
February 4, 2025
By Rian Howlett, Karen Friar, and Ines Ferré
The U.S. stock market experienced a turbulent day on Monday, with major indices responding to the latest announcements regarding tariffs from the Trump administration. The tech-heavy Nasdaq Composite saw a significant drop, closing down 1.2%, while the S&P 500 and Dow Jones Industrial Average fell 0.7% and 0.3% respectively. However, the Dow clawed back some of its earlier losses due to a last-minute reprieve on tariffs against Mexican imports.
Tariffs Loom Amid Market Uncertainty
Investors reacted sharply to the impending tariffs that were scheduled to come into effect on Tuesday. The proposed measures included a robust 25% tariff on imports from Canada and Mexico, as well as a 10% duty on goods from China. These developments particularly impacted consumer discretionary stocks, which include major automakers. Additionally, technology stocks also felt the strain, with shares of industry giants such as Nvidia, Apple, and Tesla all dropping more than 2.5%.
Despite the overall downturn, the market did see some recovery thanks to the announcement from President Trump that tariffs on Mexican imports would be delayed by one month. This decision came after a phone call with Mexican President Claudia Sheinbaum, who agreed to deploy 10,000 troops to the U.S. border to help curtail the flow of fentanyl and illegal migrants.
Reactions from Canada and Market Speculation
Following the announcement regarding Mexico, market participants looked ahead to potential reactions from Canada, which could also experience similar tariff implications. Canadian Prime Minister Justin Trudeau confirmed that the United States would pause tariffs on Canadian goods for at least 30 days. Trudeau stated, "I just had a good call with President Trump," emphasizing both countries’ commitment to collaborating on border security through a $1.3 billion enforcement plan.
The temporary suspension of Canadian tariffs relieved some pressure within the stock market, as investors hoped for a proactive deal similar to that negotiated with Mexico. Market anticipation heightened as Trump and Trudeau held a phone conversation in the afternoon, reflecting an ongoing effort to mediate trade relations.
Currency and Oil Markets Respond
In the currency markets, the U.S. dollar index fell from earlier highs, which had approached a two-year peak before slipping lower amid the tariff concerns. Additionally, West Texas Intermediate futures for oil pulled back slightly after initially jumping over 2%.
Overall, the stock market exhibited a mixed bag of performance, with defensive stocks outperforming their counterparts. The fluctuations of the indices serve as a reminder of the fragile balance between trade policy and market stability, a theme that continues to echo through the ongoing negotiations and economic maneuvers.
As the market navigates these developments, investors remain cautiously optimistic about upcoming negotiations that could shape trade policies moving forward.