The U.S. stock market experienced sharp losses on Tuesday, as an initial rebound led by tech giant Nvidia faded amid ongoing concerns about a global trade war. Investors remained on edge ahead of a speech by President Donald Trump, which could further impact market sentiment. The Dow Jones Industrial Average tumbled 669 points, or 1.6%, while the S&P 500 slipped 1.2%, and the NASDAQ Composite dipped 0.4% by the closing bell.
Nvidia Gains Fade as Tech Rally Loses Momentum
Tech stocks attempted to lead a comeback during Tuesday’s session, with NVIDIA Corporation (NASDAQ:NVDA) initially climbing before paring gains to close 1.7% higher. The semiconductor leader has faced turbulence in recent weeks, with its stock price declining 13% post-earnings. However, Citi analysts reaffirmed their positive outlook on Nvidia, maintaining that its long-term investment potential remains intact.
Other major tech names, including Alphabet Inc. (NASDAQ:GOOGL), posted gains, with Alphabet rising 2%, helping mitigate broader market losses. However, the early enthusiasm faded as the session progressed, leading to a weaker close for tech-heavy indices.
Trump’s Tariff War Escalates: Canada, Mexico, and China Respond
President Donald Trump’s aggressive trade policies took center stage as his administration’s new tariffs officially went into effect. These include:
- 25% tariffs on all imported goods from Mexico.
- 25% tariffs on non-energy Canadian imports, with an additional 10% surcharge on Canadian energy.
- An extra 10% duty on Chinese imports, on top of the existing 10% trade tax imposed in February.
Trump escalated tensions with Canada, threatening further retaliatory tariffs should Prime Minister Justin Trudeau follow through on his pledge to impose 25% counter-tariffs on $20 billion worth of U.S. goods. In a post on Truth Social, Trump warned, “Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!”
Meanwhile, Mexico and China also announced their own tariff measures:
- China’s Finance Ministry confirmed it would impose 15% tariffs on U.S. chicken, wheat, corn, and cotton imports. Additionally, soybeans, sorghum, pork, beef, fruits, vegetables, aquatic products, and dairy will be subject to 10% tariffs.
- Mexican President Claudia Sheinbaum labeled the U.S. tariffs as unjustified and signaled that retaliatory tariffs will be announced this weekend.
Wall Street Braces for Economic Fallout
Citi analysts warned that the full ramifications of Trump’s tariffs might not yet be factored into S&P 500 earnings estimates. They pointed out that while the robust Q4 performance of 2024 created optimism, trade policy risks could lead to downward earnings revisions in 2025.
“All told, we suspect most analysts, including us, are in a wait-and-see mode. That is, we can do sensitivity analysis, but likely require more granularity before building policy effects into base case assumptions,” Citi strategists noted.
Trump’s Upcoming Speech: Possible Ukraine Announcement?
Investors are also closely watching Trump’s address to Congress later Tuesday, which is expected to outline key domestic and foreign policy priorities. Reuters reported that Trump could announce a minerals rights deal with Ukraine, a move that could have geopolitical and economic implications.
Retail Sector Struggles Amid Uncertain Trade Policy
Retail stocks remained under pressure, as several major companies released earnings that reflected trade-related concerns:
- Target (NYSE:TGT) shares fell 3% after issuing a cautious sales growth outlook, citing uncertainty around Trump’s trade policies.
- Best Buy (NYSE:BBY) plummeted 13%, despite exceeding quarterly comparable sales expectations. Analysts noted that consumers took advantage of deep promotions on high-end electronics, which raised concerns about long-term profitability.
- Nordstrom (NYSE:JWN) edged up 0.3% after beating comparable sales expectations and announcing the departure of its Chief Financial Officer, Cathy Smith.
- AutoZone (NYSE:AZO) finished flat after missing second-quarter revenue estimates, as consumer spending patterns and currency fluctuations weighed on performance.
Looking Ahead: Market Volatility and Trade Developments
As investors navigate heightened trade tensions, market volatility is expected to persist. Analysts are watching closely for potential policy shifts and economic adjustments in response to Trump’s tariff strategy. With additional trade-related announcements anticipated in the coming weeks, businesses and investors must remain vigilant in assessing the evolving global trade landscape.
Stay tuned for further updates on market reactions, economic forecasts, and policy developments as the trade war unfolds.
