US stocks drop amid fresh tariffs on Canada, recession fears
Spencer Platt/Getty Images
(NEW YORK) — U.S. stocks dropped on Tuesday, extending losses suffered a day earlier amid a fresh round of tariffs on Canada and concern about a possible recession.
The Dow Jones Industrial Average tumbled about 515 points, or 1.2%, while the S&P 500 fell 0.8%. The tech-heavy Nasdaq ticked down 0.4%.
The Tuesday selloff extended a days-long market decline touched off by U.S. tariffs imposed last week on Canada, Mexico and China, some of which were delayed.
President Donald Trump on Tuesday announced retaliatory measures on Canada after they slapped a 25% tariff on electricity sent to the U.S., saying that he is imposing an additional 25% tariff on steel and aluminum, bringing those tariffs to 50%.
The move escalated a global trade war that intensified a day earlier, when China slapped retaliatory tariffs on the U.S., deepening trade tensions between the world’s two largest economies.
On Monday, the tech-heavy Nasdaq plummeted 4%, recording its worst day of trading since 2022. The Dow Jones Industrial Average and S&P 500 each dropped more than 2% on Monday.
The market drawdown on Monday extended losses last week. The S&P 500 recorded its worst week since September.
When asked about a potential recession in an interview broadcast on Sunday, Trump said tariffs imposed in recent days could bring about a “period of transition.”
“I hate to predict things like that,” Trump told Fox News in an interview recorded on Thursday. “It takes a little time, but I think it should be great for us.”
In response to a question later on Sunday about his reluctance to rule out a recession, Trump said: “I tell you what, of course you hesitate. Who knows?”
The Bureau of Labor Statistics is expected Tuesday morning to release a report on how many jobs are open in the economy, which could provide another clue about the strength of economy amid the new recession concerns. An inflation report is expected Wednesday.
This is a developing story. Please check back for updates.
Annabelle Gordon for The Washington Post via Getty Images
(NEW YORK) — Price hikes for gasoline and groceries could reach shoppers within days in the aftermath of tariffs imposed by the Trump administration, experts told ABC News.
Some products such as auto fuel and fresh produce will be hit with near-instant price increases, while others like cars, laptops and children’s toys will show hikes in the coming weeks and months, they said.
The Trump administration imposed 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
Mexico, Canada and China make up the three largest U.S. trading partners, accounting for a vast array of products ranging from everyday essentials to big-ticket purchases.
Tariffs of this magnitude would likely increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers, experts said.
“Higher tariffs will translate into higher prices for some products very quickly,” Mark Zandi, chief economist at Moody’s Analytics, told ABC News. “It will take longer for everything from vehicles to appliances to consumer electronics.”
In a series of social media posts last month, Trump said he would place tariffs on Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the U.S.
During an address to a joint session of Congress on Tuesday night, Trump also sharply criticized tariffs imposed on U.S. goods by Canada, Mexico and China.
“President Trump continues to demonstrate his commitment to ensuring U.S. trade policy serves the national interest,” the White House said in a statement on Tuesday.
The U.S. imported $38.5 billion in agricultural goods from Mexico in 2023, making it the top recipient of such products, U.S Department of Agriculture data showed. Those imports include more than $3 billion worth of fresh fruits and vegetables.
Roughly 90% of avocados eaten in the U.S. last year originated in Mexico, USDA data showed. Other products with a high concentration of Mexican imports include tomatoes, cucumbers, bell peppers, jalapeños, limes and mangos.
These products will show price increases within days because fresh produce cannot be held on shelves for an extended period, meaning imports slapped with tariffs will soon reach shoppers, Jason Miller, a professor of supply chain management at Michigan State University, told ABC News.
“That’s what you’d expect to be hit the fastest,” Miller said.
A similar dynamic will play out for gasoline prices for some U.S. drivers living in regions that rely on crude oil from Mexico and Canada, said Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry.
Mexico and Canada account for 70% of U.S. crude oil imports, which make up a key input for the nation’s gasoline supply, according to the U.S. Energy Information Administration, a government agency.
Those imports come primarily from Canada, which sends crude oil to U.S. refineries built specifically to process the crude and redistribute it as gasoline for cars and trucks. Gasoline that originates as Canadian crude reaches customers in the upper Midwest as well as some along the East and West coasts, Fitzgerald said.
Gas refiners and retailers retain the ability to alter prices multiple times per day, meaning price hikes may have hit some drivers as early as Tuesday, he added.
“Think about a digital board at a gas station – a couple taps to a button and the price goes up,” Fitzgerald said.
A second wave of price increases will hit a wide-ranging set of products over the coming weeks and months, some experts said.
A large share of consumer electronics – such as laptops, video game systems and smartphones – enter the U.S. from China, meaning the new tariffs will filter through into higher prices for those goods, they said.
Price hikes will ultimately hit children’s toys, since many of those products also originate in China, Miller said.
Some U.S. retailers appear to have been stockpiling children’s toys in anticipation of the tariffs, but the stored items will run out soon, he added.
“You probably don’t get much of a reprieve beyond April,” Miller said.
Prices for Mexico-made beer and tequila will also rise over the coming months, as will the cost of Canada-made maple syrup, Miller added.
Canada is the top source of imported U.S. eggs, adding stress to a supply chain already decimated by an avian flu outbreak.
Egg prices skyrocketed 53% over the past year, U.S. Bureau of Labor Statistics data showed last month.
Since the U.S. relies overwhelmingly on domestic egg production, however, a potential price increase for Canadian eggs is not expected to meaningfully drive up egg prices at U.S. stores, Miller said.
“But it certainly doesn’t make things better,” Miller added.
ABC News’ Jacob Eufemia contributed to this report.
(NEW YORK) — President Donald Trump criticized Canada on Wednesday for what he described as failure to take the steps necessary for the United States to withdraw tariffs imposed a day earlier.
Trump said he held a call with Canadian Prime Minister Justin Trudeau on Wednesday during which the two leaders discussed a path to U.S. withdrawal of the tariffs, Trump said, noting such an outcome would require sufficient action by Canada to address drug trafficking.
A week ago, Trump alleged that illicit drugs such as fentanyl had continued to enter the U.S. through Mexico and Canada despite agreements reached last month to address the issue.
In a post on Truth Social on Wednesday, Trump said, “nothing has convinced me” that the flow of fentanyl into the U.S. had stopped.
“[Trudeau] said that it’s gotten better, but I said, ‘That’s not good enough.’ The call ended in a ‘somewhat’ friendly manner!” Trump said.
Since September, nearly all fentanyl seized by the U.S. came through the Southern border with Mexico, according to the U.S. Customs and Border Patrol, or CBP, a federal agency. Less than 1% of fentanyl was seized at the Northern border with Canada, CBP found.
Canadian Prime Minister Justin Trudeau sharply criticized the tariffs on Tuesday, calling them a “dumb” policy that does not “make sense.”
The reason for the tariffs is based on a false allegation about Canada as a major source of drugs entering the U.S., Trudeau added.
Persistent tensions between the U.S. and Canada emerged after China issued a warning on Tuesday night that it stands ready for any “type of war” with the United States in the aftermath of tariffs imposed by the Trump administration.
The U.S. slapped 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
A spokesperson for the Chinese foreign ministry said the tariffs would not lead to a resolution of U.S. concerns about fentanyl originating in China.
“If the U.S. truly wants to solve the fentanyl issue, then the right thing to do is to consult with China on the basis of equality, mutual respect and mutual benefit to address each other’s concerns,” Chinese spokesperson Lin Jian said at a press conference late Tuesday.
“If the U.S. has other agenda in mind and if war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” the spokesperson added.
The comments came soon after the Trump administration imposed 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
Within minutes of the new U.S. tariffs taking effect, China unveiled on Tuesday its initial response by placing additional 10% to 15% tariffs on imported U.S. goods, like chicken, wheat, soybeans and beef.
“The retaliatory tariffs that China is imposing is very specific and directly targeted at American farmers, who are mostly in red states and mostly voted for Trump,” Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Center for China Analysis, told ABC News.
“So China is trying to create pain where it matters for Trump, and it’s hoping to get Trump to the negotiating table and offer relief for this group of Trump supporters,” Thomas added.
The recent duties will be placed on top of similar tariffs imposed by China during the first Trump administration’s trade war in 2018. Some of those tariffs are already at 25%, though Beijing issued some waivers as a result of the 2020 “phase one” trade deal.
The new Chinese tariffs are set to come into effect for goods shipped out March 10.
In a series of social media posts last month, Trump said he would place tariffs on Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the U.S.
During an address to a joint session of Congress on Tuesday night, Trump also sharply criticized tariffs imposed by the Chinese government on U.S. goods.
“President Trump continues to demonstrate his commitment to ensuring U.S. trade policy serves the national interest,” the White House said in a statement on Tuesday.
Commerce Secretary Howard Lutnick said on Tuesday afternoon that Trump may soon offer Canada and Mexico a pathway to relief from tariffs placed on some goods covered by North America’s free trade agreement.
Lutnick did not mention a potential compromise with China.
ABC News’ Selina Wang, Kevin Shalvey, Karson Yiu and Ellie Kaufman contributed to this report.
(NEW YORK) — Consumer prices rose 2.8% in February compared to a year ago, easing slightly over the first full month under President Donald Trump and offering welcome news for markets roiled by a global trade war. Inflation cooled more than economists expected.
The major stock indexes climbed in early trading on Wednesday, minutes after the inflation report was released, but markets soon teetered amid an escalating trade war and recession concerns.
Speaking at the White House later in the morning, Trump touted the inflation report as “very good news.”
Price increases slowed from a 3% inflation rate recorded in January, though inflation remain nearly a percentage point higher than the Federal Reserve’s target of 2%.
Egg prices, however, a closely watched symbol of price increases, soared 58.8% in February compared to a year ago, accelerating from the previous month. Bird flu has decimated the egg supply, lifting prices higher.
The Justice Department opened an investigation into egg producers to learn if market practices have contributed to the price hikes, a source familiar with the matter told ABC News.
Prices dropped for tomatoes, cereal, cupcakes and cookies over the past year. Some grocery prices increased faster than the pace of overall inflation, however, including beef, biscuits and apples.
A rise in housing costs accounted for nearly half of the price increases last month, the U.S. Bureau of Labor Statistics said. A decline in the price of airline tickets and gasoline helped offset some of the increased costs, the agency said.
The inflation report arrived hours after the U.S. imposed 25% tariffs on steel and aluminum, prompting near-immediate retaliatory duties from the European Union and marking the latest escalation of trade tensions.
Tariffs are widely expected to raise prices for consumers, since importers typically pass along a share of the added cost to shoppers.
The stock market has plunged since Trump imposed tariffs on Mexico, Canada and China last week, giving rise to warnings on Wall Street about a potential economic downturn. Within days, Trump delayed some of the tariffs on Canada and Mexico.
The report on Wednesday may soften pressure on the Federal Reserve, which bears responsibility for keeping inflation under control.
Federal Reserve Chair Jerome Powell last week said the administration’s tariff plan would likely raise prices for U.S. shoppers and retailers.
The scale and duration of the tariffs remain unclear, but a portion of the taxes on imports will probably reach consumers, Powell told an economic forum in New York City last week.
“We’re at a stage where we’re still very uncertain about what will be tariffed, for how long, at what level,” Powell said. “But the likelihood is some of that will find its way. It will hit the exporters, the importers, the retailers and to some extent consumers.”
On multiple occasions in recent days, the White House declined to rule out a possible recession, saying the tariffs would require a “period of transition.”
A solid, albeit disappointing jobs report on Friday exacerbated concerns among some observers.
Employers hired 151,000 workers last month, falling short of expectations of 170,000 jobs added. The unemployment rate ticked up to 4.1%, which remains a historically low figure.
The Trump administration slapped 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
A day later, Trump issued a one-month delay for tariffs on auto-related goods from Mexico and Canada. The carve-out expanded soon afterward with an additional one-month pause for goods from Mexico and Canada compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
On Tuesday, Trump announced plans to add another 25% tariff on Canadian steel and aluminum, bringing the total to 50%. The move came in response to threats made by Ontario to cut off electricity to parts of the U.S., Trump said.
Hours later, Ontario Premier Doug Ford issued a joint statement with U.S. Commerce Secretary Howard Lutnick on X announcing the suspension of the 25% surcharge on electricity sent to the U.S.
The tariffs slapped on Canada, Mexico and China are widely expected to increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers.
A key gauge of consumer confidence registered its largest monthly drop since August 2021, the nonpartisan Conference Board said in February.
The share of consumers who expect a recession within the next year surged to a nine-month high, the data showed. A growing portion of consumers believe the job market will worsen, the stock market will fall and interest rates will rise, the report added.
ABC News’ Katherine Faulders and Soo Youn contributed to this report.
