Stock Market Update: S&P 500 and Nasdaq Slip, Dow Recovers as Mexico Secures Tariff Delay
February 3, 2025 — The U.S. stock market experienced notable volatility on Monday following announcements related to tariff policies under the Trump administration. The technology-heavy Nasdaq Composite and the broad-based S&P 500 suffered declines, while the Dow Jones Industrial Average managed to claw back some losses as Mexico secured a reprieve on new tariffs.
Market Movement Amid Tariff Uncertainty
The Nasdaq Composite (^IXIC) closed down 1.2%, trimming some of its earlier losses, while the S&P 500 (^GSPC) fell approximately 0.7%. The Dow Jones Industrial Average (^DJI), after an initial dip, recovered somewhat to close down just 0.3%. Defensive sectors outperformed, but consumer discretionary and technology stocks took the brunt of the market’s downturn.
High-profile tech shares such as Nvidia (NVDA), Apple (AAPL), and Tesla (TSLA) each dropped more than 2.5%, reflecting investor concerns over the potential impact of tariffs on key industries. Consumer discretionary companies, including automakers, also faced downward pressure amid fears that tariffs could disrupt supply chains and increase costs.
Tariffs on Canada, Mexico, and China Prompt Market Jitters
The market turbulence stems from tariff measures that were scheduled to begin on Tuesday under the Trump administration. The proposed duties included a 25% tariff on imports from Canada and Mexico, and a 10% tariff on goods from China. Energy imports from Canada were to be subject to a lower 10% tariff.
However, in a significant development on Monday morning, President Donald Trump announced a one-month delay on tariffs targeting Mexico after discussions with Mexican President Claudia Sheinbaum. This delay followed Mexico’s commitment to deploy 10,000 soldiers to its border to help curtail the flow of fentanyl and illegal migration into the United States, a move that appeared to ease tensions and provide some relief to markets.
Canada Following Mexico’s Lead?
Market participants closely watched a subsequent phone call between President Trump and Canadian Prime Minister Justin Trudeau on Monday afternoon. Trudeau conveyed via social media that the U.S. tariff imposition on Canadian goods would be paused for at least 30 days while both countries work on enhanced border enforcement measures, including a $1.3 billion plan to fight fentanyl trafficking featuring new helicopters, technology, and additional personnel.
This pause calmed some fears of an immediate tariff escalation with Canada, though tariffs on Canadian and Chinese imports technically remain scheduled to take effect Tuesday pending further developments.
Broader Market Reactions
The U.S. Dollar Index (DX=F), which had earlier climbed to nearly a two-year high, gave back some gains as tariff news injected uncertainty. Energy markets also responded; West Texas Intermediate crude futures (CL=F) pared earlier gains after surging over 2%, reflecting concerns about global supply and demand amid geopolitical tensions.
Investor Outlook
The partial rollback on Mexico tariffs, paired with potential de-escalation on Canada, offered a modest reprieve for investors amid a fraught backdrop of trade frictions. However, with duties on Canadian and Chinese imports still looming and retaliatory tariffs hinted by Canada, market volatility is likely to continue until a more definitive resolution is reached.
Investors remain cautious, particularly in sectors vulnerable to trade disruptions such as technology and consumer discretionary, while defensive stocks are favored in the current environment of uncertainty.
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