US stock futures plummeted Monday following President Donald Trump’s sweeping tariff announcement on key trading partners, intensifying fears of supply chain disruptions, rising inflation, and economic slowdown.
Futures tied to the Dow Jones Industrial Average dropped 676 points (1.5%), while S&P 500 futures declined 1.75%.
The Nasdaq-100 slipped 1.8%, and the Russell 2000, which tracks small-cap stocks, tumbled 2.1%.
Meanwhile, the Cboe Volatility Index (VIX), a key measure of market uncertainty, briefly spiked above 20 before settling.
“Markets may now need to take the rest of Trump’s tariff agenda literally rather than just seriously,” said Tobin Marcus, Wolfe Research head of US policy and politics, in a note.
“If this new level of seriousness gets priced in suddenly, Monday could be a rough day for markets.”
Trump imposes new tariffs against Canada, Mexico and China
Over the weekend, Trump announced a 25% tariff on goods from Canada and Mexico, along with a 10% levy on Chinese imports.
Canadian energy exports to the US received a lower 10% tariff, but the move still rattled investors.
The response from global trade partners was swift.
Canada imposed retaliatory tariffs, while Mexico stated it would consider levies on US imports in response.
Meanwhile, China announced it would challenge the US tariffs at the World Trade Organization (WTO), signalling an escalation in trade tensions.
Trump also hinted that the European Union could be next in line for tariffs, adding further uncertainty to global markets.
GM, Ford stocks fall in pre-market trading
Companies that rely heavily on North American supply chains and imported goods bore the brunt of market losses, with automakers and consumer-facing businesses suffering the most.
Among automakers, General Motors (GM) fell 7%, while Ford slid 4% in premarket trading.
Auto suppliers Aptiv and Avery Dennison also took a hit, losing 6% and 1%, respectively. Engine manufacturer Cummins was down 3%.
Retail and consumer stocks were not spared either.
Constellation Brands, a major importer of Mexican alcohol, tumbled 5%, Chipotle, which relies on Mexican avocados, dropped 3%, while Nike and Lululemon, both of which have significant global supply chains, lost 3%.
However, some sectors saw gains amid the tariff news, particularly US-based steelmakers, as investors speculated that import restrictions would boost domestic steel demand.
Nucor gained 3%, while Steel Dynamics rose nearly 4% in premarket trading.
Analysts warn of potential economic fallout
The tariff escalation has triggered alarm bells on Wall Street, with analysts reassessing their economic forecasts.
JPMorgan Chase’s chief economist Bruce Kasman and his team warned that Trump’s latest trade policies mark a major shift from previous forecasts for 2025 and 2026.
“The scale and structure of these tariffs differ significantly from what had been previously built into our economic outlook,” Kasman wrote.
He warned that disruptions to supply chains could increase costs and inflationary pressures.
He also said that North American business sentiment may decline amid uncertainty over future trade agreements.
Further, the new tariffs threaten long-standing free trade agreements, increasing economic instability.
“Equally important, this weekend’s actions challenge our underlying view that the Trump administration will strive to limit disruptive policies as it balances its desire to reduce engagement with the world with a commitment to support US businesses. In short, the risk is that the policy mix is tilting (perhaps unintentionally) into a business-unfriendly stance,” the analysts said.
Investors eye earnings and key economic data
The tariff-driven market volatility comes at a crucial time, as investors prepare for a busy week of corporate earnings reports and a key US labor market update.
More than 120 S&P 500 companies are set to report earnings, including tech giants Alphabet, Amazon, and Palantir, as well as consumer leaders like Walt Disney and Mondelez.
Additionally, the January nonfarm payrolls report, due on Friday, is expected to show 175,000 jobs added, according to Dow Jones estimates.
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