The US stock market went into freefall once trading opening after a big sell-off on Wall Street in response to President Donald Trump’s trade war on Mexico, Canada and China.
Once markets opened, the Dow Jones Industrial Average dropped 432 points, or one per cent, while the S&P 500 lost one per cent, and the Nasdaq saw 0.5 per cent wiped out..
Yesterday saw a steep decline, with the S&P 500 posting its largest daily loss since December 2025 at 1.8 per cent down.
This reaction from investors comes after the White House’s implementation of 25 per cent tariffs on imports from Mexico and Canada, with an additional 10 per cent levy being imposed on China.
Following this news, London’s FTSE 100 Index opened sharply lower in Tuesday morning trading with the blue chip share index dropped 0.6 per cent, down 50.8 points at 8820.5, soon after opening.
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Investors appear spooked at Trump’s trade war
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During a press conference yesterday, Trump confirmed he will continue with his plans to levy tariffs on imports coming in from the United States’ “very unfair” neighbouring countries.
In reaction, Clark Geranen, the chief market strategist at CalBay Investments, said: “While Tuesday’s tariffs are a go, it remains very unclear on just how long these tariffs will remain,”
“We tend to believe these are more of a negotiation tactic and not the start of a long and drawn out reciprocal trade war,” he said. “Still, in these situations, investors sell first and ask questions later.”
Canada, Mexico and China have pledged to impose retaliatory tariffs on US companies and sectors in the wake of the US President’s decision.
During his first administration, and during President Joe Biden’s time in the White House, the US has imposed tariffs on China and specific industries.
However, these tariffs have came under for being imposed on NATO allies to the United States, with Trump suggesting the European Union could be next.
According to the National Institute of Economic and Social Research (NIESR), the latest tariffs will push up prices and weaken economic activity across all affected nations.
The think tank estimates that US gross domestic product (GDP) growth could be nearly half a percentage point lower, while inflation may rise by one percentage point as a result.
Notably, the NIESR suggests the impact on Canada and Mexico will be more severe due to their high trade dependence on the US.
In comparison, economists question whether the impact on China’s economy will be that detrimental in comparison.
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NIESR’s principal economist Ahmet Kaya, said: “Policies so far suggest that Trump is not going to stop here, and further tariff increases and broader coverage seem likely.
“A full-scale tariff war could have a ripple effect across global trade, impacting supply chains, businesses and households worldwide.
“Even the UK, despite not being directly targeted, may feel the fallout through indirect economic effects.
“These findings send a clear message: tariffs not only fail to achieve Trump’s intended aims but also backfire and harm the US and US allies instead.”
