4:45pm: Canada-US tariffs paused
Canada and the United States have sidestepped a potential tariff war, at least for now, after leaders from both nations reached some common ground during a call on Monday.
Prime Minister Justin Trudeau announced on X that the tariffs have been postponed until March 1.
I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly…
— Justin Trudeau (@JustinTrudeau) February 3, 2025
4:15pm: Tariffs tension
The three major stock indexes finished Monday’s session in the red in reaction to the Trump administration’s tariff rollout against Canada and China. The announcement of a one-month pause in tariffs for Mexico saw stocks recover from heavier losses earlier in the session.
The Nasdaq led the losses, down 1.2% at 19.391 points. The S&P 500 fell 0.8% and the Dow Jones closed down 0.3% at 44,421 points.
Attention after the closing bell will turn to software firm Palantir’s quarterly earnings.
2:55pm: Stronger PMI figures
Despite trade uncertainty and new tariff measures from President Trump, the US economy received a boost from stronger-than-expected manufacturing PMI figures.
The ISM index rose to 50.9 in January, ending a 26-month contraction streak.
While this recovery signals improving business confidence and potential domestic demand growth, it has been somewhat overshadowed by ongoing tariff concerns, particularly the extension granted to Mexico until March, analyst Quasar Elizundia at Pepperstone noted.
"The return of manufacturing to expansionary territory is a particularly significant signal, as the sector had experienced a prolonged contraction, raising doubts about the industrial health of the US economy," Elizundia noted.
"While manufacturing is not the primary economic driver of the U.S., its recovery points to greater business confidence and a potential improvement in domestic demand."
1:00pm: Short-lived measures?
Bank of America analysts predict that the 25% tariffs imposed by the US on imports from Canada and Mexico will likely be short-lived, despite causing immediate economic tensions.
Analysts argue that the tariffs' disruptive effects on US business interests make them unlikely to last long.
Bank of America identifies three key reasons why the tariffs may be temporary: the pressure from US business groups, the challenge of implementing tariffs due to the high integration of North American manufacturing, and the likelihood that Canada and Mexico will agree to most of President Trump’s terms on migration and drugs.
Despite the expectation of these tariffs being short-lived, the immediate economic impact could still be significant, with forecasts of lower growth and higher inflation across the board, particularly in the US.
12:15pm: Tariff fallout
Stocks were still trading lower at midday, as investors react to the fallout from President Trump's recent tariff announcements.
The Dow Jones is down 0.3%, while the S&P 500 has fallen 0.8%. The tech-heavy Nasdaq is experiencing the steepest decline, down 1.2%.
The market is digesting the broader implications of the new tariffs, which will affect $1.3 trillion worth of goods. With these tariffs impacting countries like Canada, Mexico, and China, investors are questioning the long-term effects on global trade and US economic growth.
Hani Abuagla, Senior Market Analyst at XTB MENA, commented on the situation, saying, "The scale of these tariffs, three times larger than the first trade war, raises serious concerns about the sustainability of the policy.
"The economic impact could be significant, potentially reducing US GDP growth by over 2 percentage points by 2026, while inflation could rise, further complicating the Fed’s ability to lower interest rates."
The potential slowdown in trade, especially within North America, could be detrimental to both US and neighboring economies, with Mexico and Canada poised to feel the most significant effects.
11:05am: Mexico gets reprieve
President Donald Trump announced that he agreed to "immediately pause" the anticipated 25% tariffs on Mexico for one month after a "very friendly" conversation with Mexico’s President Claudia Sheinbaum.
Sheinbaum reportedly agreed to deploy 10,000 Mexican soldiers to help curb the flow of fentanyl and illegal migrants into the US.
The pause in tariffs will allow for negotiations led by US officials, including Secretary of State Marco Rubio and Secretary of Treasury Scott Bessent, along with high-level representatives from Mexico.
Trump is also expected to speak with Canadian Prime Minister Justin Trudeau regarding new tariffs set to take effect on Canada later today.
9.40am: Wall Street tumbles on Trump trade war jitters
Wall Street followed stocks globally in facing sharp declines as trading got underway on Monday after Donald Trump confirmed tariffs on Canadian, Mexican and Chinese goods.
The Nasdaq slumped 1.6% after the bell, as the S&P 500 shed 1.3% and the Dow Jones dropped 1.1%.
Following confirmation on Saturday, tariffs of 25% on Canada and Mexico, alongside 10% against Chinese goods, were set to come into force on Tuesday.
Risk-off sentiment had dominated on Monday as a result, City Index analyst Fawad Razaqzada said, in part given little time for deals to avert the levies being introduced.
Nvidia Corp was among the Dow’s early fallers on Monday, dropping 5.4%, as Nike Inc, Goldman Sachs and Apple Inc also slipped.
Tesla Inc shed 5.2% to top the Nasdaq’s losers in the meantime.
In reaction, the Dow started to trend higher, while still trading 0.3% below opening levels.
6.47am: Steep declines seen as Trump firms up tariffs
Wall Street was set for a beating as Monday’s opening bell approached after president Donald Trump confirmed sweeping tariffs for Mexico, Canada and China at the weekend.
Futures had the Nasdaq down 1.6% before the week’s trading got underway, while the S&P 500 was seen 1.4% lower and the Dow Jones off 1.2%.
Saturday saw Trump firm up 25% levies on Canadian and Mexican goods, alongside shallower 10% tariffs on Chinese imports and Canadian energy.
Tariffs against the European Union were then threatened later on, while the trio already hit pledged to respond, with Canada laying out levies of its own against US goods.
Fears of a trade war sparked warnings over inflationary pressure and low economic growth ahead, leaving further uncertainty around the Federal Reserve’s rate-cutting path.
“The consequences for global markets will come down to whether nations respond with a tit-for-tat levy on US goods rather than striking a deal that would seek to bring an end to this crisis,” Scope Markets analyst Joshua Mahony said.
“Nonetheless, today is a brutal reminder for investors that Trump’s pro-business approach may not necessarily always translate into market-friendly announcements. Volatility is back and it’s here to stay.”