On Tuesday, March 4, 2025, stocks on Wall Street took a hit as the trade war between the U.S. and its key trading partners intensified, erasing all gains for the S&P 500 since Election Day.
The escalating tariffs between the U.S., China, Canada, and Mexico contributed to a recent decline in U.S. stocks due to signs of economic weakness.
The S&P 500 declined by 1.7%, with every sector in the benchmark index experiencing losses. The Dow Jones Industrial Average dropped by 722 points, or 1.7%, as of 11:03 a.m. Eastern Time.
Also Read | World shares decline as Trump’s tariffs on Canada, Mexico and China take effect
The Nasdaq composite also fell by 1.5%. The tech-heavy index is approaching a 10% decline from its recent closing high, signaling a correction in the market. Technology stocks, which were instrumental in driving market gains in 2024, have been losing ground and weighing down the market in 2025.
European markets experienced significant declines, while Asian stocks saw more modest drops.
The recent sell-off on Monday, March 3, 2025, compounded the market’s losses. In total, the decline has wiped out all gains made since President Donald Trump’s election in November. The previous rally was fueled by expectations of policies that would boost the U.S. economy and businesses. Concerns about tariffs increasing consumer prices and reigniting inflation have been impacting both the economy and Wall Street.
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Imports from Canada and Mexico now face a 25% tax, with Canadian energy products subject to 10% import duties. The 10% tariff on Chinese imports imposed by Trump in February was doubled to 20%.
Retaliatory measures were swiftly implemented.
China responded by announcing additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy, and beef, along with expanded controls on business dealings with major U.S. companies. Canada and Mexico also announced tariffs on U.S. goods.
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The tariffs have prompted warnings from retailers such as Target and Best Buy as they release their latest financial results. Despite beating earnings forecasts, Target’s stock dropped by 5.4% due to anticipated pressure on profits at the beginning of the year from tariffs and other costs.
Best Buy saw a 14.2% plunge after issuing a weaker-than-expected earnings forecast and highlighting the impact of tariffs.
Best Buy CEO Corie Barry emphasized the critical importance of international trade to the company and the industry.
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Barry mentioned that China and Mexico are the top two sources for products sold by Best Buy, and the company expects vendors to pass on tariff costs, potentially leading to price increases for American consumers.
Concerns about profits arise as companies conclude their latest round of earnings reports. While S&P 500 companies reported a broad earnings growth of 18% in the fourth quarter, Wall Street has revised expectations for the current quarter to around 7% growth from initially forecasted 11% at the start of the year.
Worries about profits are compounded by economic reports signaling concerns, including a rise in pessimism about inflation among U.S. households, resulting in reduced spending. Consumer spending has been a key driver of U.S. economic growth despite high interest rates.
Also Read | China slaps extra tariffs of up to 15% on imports of major U.S. farm exports
Market participants are anticipating further interest rate cuts by the Federal Reserve in 2025. However, the central bank has adopted a more cautious approach, partly due to uncertainties surrounding the economic impact of tariffs. The Fed is expected to maintain interest rates at its upcoming meeting in March.
The Fed had raised interest rates to their highest level in two decades to combat inflation, but began cutting the benchmark rate in 2024 as inflation approached its 2% target. Despite efforts, inflation remains slightly above the target, and tariffs pose a risk of price hikes that could fuel inflation.
In the bond market, Treasury yields declined, with the yield on the 10-year Treasury falling to 4.12% from 4.16% late on Monday, March 3, 2025. This sharp decline reflects growing concerns about the direction of the U.S. economy.
Published – March 04, 2025 11:36 pm IST
