The stock market tumbled for a second consecutive day on Tuesday as President Trump’s tariffs left investors fearful of potential shockwaves for the economy. The Dow Jones Industrial Average dropped 670.25 points, or 1.55%, ending the session at 42,520.99. This decline built on Monday’s loss of nearly 650 points.
The S&P 500 dropped 1.22% and closed at 5,778.15 after making gains in the prior session. The Nasdaq Composite lost 0.35% and finished at 18,285.16. At their worst levels, the Dow fell more than 840 points, and the S&P 500 slid 2%.
The Nasdaq dropped more than 2% at its lowest and flirted with correction territory, a term that refers to an index falling 10% from a recent high. More than 80% of S&P 500 stocks ended the day lower. Some investors scooped up shares that have been battered this year, looking for bargains in a down market.
Tuesday’s drop came after Trump instituted 25% duties on Canada and Mexico that took effect at midnight. He also imposed additional tariffs on Chinese goods, prompting China to retaliate with its own tariffs. Mexican President Claudia Sheinbaum indicated that Mexico would respond with tariffs and other measures to be announced over the weekend.
After Canadian Prime Minister Justin Trudeau said his country would also implement a 25% levy on U.S. goods, Trump announced intentions to impose even higher tariffs on Canada. Shares of companies with significant imports from these countries came under pressure.
Markets react to new trade tariffs
For example, one major company dropped more than 4%, another fell nearly 3%, and a company that sources about a quarter of its avocados from Mexico slipped 2%. Another firm shed 3%, with its CEO indicating that prices for some produce would be going higher in the next few days because of the tariffs. This week’s decline has pushed the S&P 500 into the red for 2025 and brought the Dow to the flatline.
Losses steepened on Monday after Trump confirmed the long-awaited levies were coming. “I’m calling it a conditional correction,” said Sam Stovall, chief investment strategist at CFRA Research. “It’s really based on one condition: By how much Trump is going to retain the tariffs.”
Soft economic data released recently, paired with the tariffs, have given market participants further reason for worry.
The tariffs have led to fears of another hit on economic growth. Bank and retail stocks led the way down on Tuesday as investors braced for the economic impact. Despite the overall downturn, some of the market’s biggest losers managed to pare back their losses later in the session.
For example, a major stock opened in negative territory but saw a rally, trading 10% higher after being down over 4% earlier. An AI darling was nearly 4% lower but rebounded, trading at its session highs by the afternoon. “The markets today are emblematic of where to go, and that’s to consider more safe assets, staying in defensives,” said Monica Guerra, head of U.S. policy at Morgan Stanley Wealth Management.
“You’re looking at utilities, real estate — very low exposure to tariffs.”
The three major indexes finished Tuesday’s session in the red. The Dow and S&P 500 slid 1.6% and 1.2%, respectively, while the Nasdaq pulled back nearly 0.4%.
