Stocks dropped lower on Tuesday as market participants reacted to an escalation of the U.S.-Canada trade war. The Dow Jones Industrial Average sank nearly 500 points in afternoon trade, while the S&P 500 Index and Nasdaq Composite lost about 0.8% and 0.2%, respectively.
Here's how the market settled on Tuesday:
S&P 500 Index (NYSE: SPY): -0.75% or -42.49 points to 5,572.07
Dow Jones Industrial Average (NYSE: DIA): -1.14% or -478.23 points to 41,433.48
Nasdaq Composite Index (NASDAQ: QQQ): -0.18% or -32.22 points to 17,436.10
In a post on Truth Social, President Donald Trump announced that tariffs on steel and aluminum imports from Canada would double to 50% from 25%, effective Wednesday, in response to Ontario placing a 25% tariff on electricity exports into the country. This move kindled fears of a coming U.S. recession as Trump's broadening tariffs policies are expected to impact growth throughout the year.
"Another day, another tariff announcement," said Ryan Grabinski, director of investment strategy at Strategas Asset Management, quoted by Yahoo!Finance. "The same way it's going to be hard for consumers to make big ticket purchases or businesses to make capital investment decisions, its going to remain difficult for investors to step in and decisively but until we start to see some of the positives that were largely expected from the Administration."
Goldman Sachs lowered its 2025 GDP forecast to 1.7% from 2.4% in a research note on Monday, citing rising concerns over the Trump administration's trade policies.
"The reason for the downgrade it that our trade policy assumptions have become considerably more adverse," economist Jan Hatzius wrote in a note.
The economist also raised its projection for the Federal Reserve's preferred inflation gauge at the end of the year to 3%, up from its previous expectations for it to fall in the mid 2% range.
"Our near-term view is that the FOMC [Federal Open Market Committee] will want to stay on the sidelines and make as little news are possible until the policy outlook has become clearer," Hatzius said.