U.S. stocks plunged on Monday after President Donald Trump confirmed that blanket tariffs on Canada and Mexico would begin on Tuesday. The Dow Jones Industrial Average closed down 650 points, or about 1.5 percent, after falling as much as 800 points earlier in the day following the president’s remarks. The S&P 500 dropped 1.75 percent, marking its biggest single-day loss since December, while the Nasdaq fell 500 points, a decline of over 2.5 percent.
During a White House event focused on investment in U.S. semiconductor production, Trump stated, “Very importantly, tomorrow, tariffs 25 percent on Canada and 25 percent on Mexico.” The announcement ended speculation that the administration might reach a last-minute deal to delay the tariffs, which many economists warn will disrupt trade with the U.S.’s two largest trading partners.
All three major stock indexes had already been in decline leading into March. The Dow and S&P 500 both fell over 1 percent in February, while the Nasdaq had its worst month since April 2024 due to concerns over tariffs, AI-driven market shifts, and continued inflationary pressures. Manufacturing data released earlier in the day also showed weaker-than-expected performance, reinforcing worries that inflation may continue to rise. Many analysts argue that tariffs on Canada and Mexico will accelerate inflation as businesses pass the increased costs onto consumers.
Trump originally signed the executive order imposing the tariffs on February 1 but delayed implementation for a month after Canada and Mexico agreed to take action to curb illegal immigration at their respective borders. However, on Monday, he expressed frustration with the situation, stating, “Just so you understand, vast amounts of fentanyl have poured into our country from Mexico, and as you know, also from China, where it goes to Mexico and then to Canada.”
Despite expectations that the tariffs might be adjusted before taking effect, Trump confirmed that they would remain at the full 25 percent rate, saying, “They’re all set. They go into effect tomorrow. There is no room left to negotiate.”
The announcement prompted strong reactions from Canada and Mexico. Canada’s foreign minister, Mélanie Joly, told the Associated Press that Canada is prepared to retaliate with $155 billion in tariffs, with an initial round of $30 billion in countermeasures already planned. Mexico’s President Claudia Sheinbaum responded by saying her country has multiple strategies prepared to handle the tariffs but would wait to see how events unfold.
Market experts have raised concerns about the long-term economic consequences of escalating trade tensions. Chris Rupkey, chief economist at FWDBONDS, noted that it remains uncertain whether the U.S. stock market can withstand this shift in trade policy. Howard Lutnick, the U.S. Secretary of Commerce, confirmed that tariffs will be enforced starting Tuesday, leaving any further adjustments to the president’s discretion.
The impact of these tariffs is expected to be immediately felt by American consumers, as importers typically pass on the costs in the form of higher prices. Goods such as groceries, fuel, and car parts are likely to become more expensive, adding further strain on household budgets. With Canada and Mexico signaling strong retaliatory measures, economic analysts warn that these actions could trigger a severe downturn. If inflation spikes while consumer spending slows, the U.S. economy could enter a crisis similar to the Great Depression of the 1930s, as rising costs, global trade disruptions, and financial instability threaten economic growth.