Stock market drops again after brief rise as Trump remains committed to tariffs

Stocks swung down, up, then down again on Wall Street as markets try to assess the potential damage from U.S. President Donald Trump’s global trade war.

After trading began, the S&P 500 quickly sank 4.7 per cent following even worse drops for financial markets worldwide amid worries that Trump’s tariffs could torpedo the global economy. But it suddenly erased all of it and surged to a gain of 3.4 per cent, which would have counted as its best day in years. Almost as quickly, the index that sits at the heart of many investors’ 401(k) accounts gave that up and was roughly flat in midday trading.

Other U.S. stock indexes also careened through shocking trading. The Dow Jones Industrial Average went from a loss of 1,700 points to a leap of nearly 900 before settling at a loss of 272 points, or 0.7 per cent, as of 11 a.m. ET. The Nasdaq composite was 0.7 per cent higher.

Wall Street’s main indexes moved sharply higher after White House economic adviser Kevin Hassett said in an interview that Trump was considering a 90-day tariff pause on all countries except China, only to fall again as the White House called word of a 90-day pause “fake news.”

Wall Street opened down today, coming off its worst week since COVID began crashing the global economy in March 2020. 

Before trading began, the S&P 500 was headed toward bear market territory, defined as a fall of more than 20 per cent from the peak. The S&P 500, Nasdaq and Dow Jones all recouped some value before markets opened. The index was off 17.4 per cent as of the end of last week. 

The S&P/TSX composite index was also trading down 1.46 per cent, while the Canadian dollar was trading for 70.21 cents US compared with 70.34 cents Friday.

The massive sell-off in riskier assets that began the day and roiled global stock markets follows Trump’s announcement of sharply higher U.S. import taxes and retaliation from China that saw markets fall sharply Thursday and Friday. 

Late Sunday, Trump reiterated his resolve, saying, “sometimes you have to take medicine to fix something.” 

Some countries, South Korea, Japan and Pakistan among them, said they were sending trade officials to Washington soon to try to seek clarity.

However, Germany’s economy minister, Robert Habeck, was defiant as he arrived at a meeting of European Union trade ministers in Luxembourg, saying the premise of the wide-ranging tariffs was “nonsense” and that attempts by individual countries to win exemptions haven’t worked in the past. 

It’s important for the EU to stick together, he said. That “means being clear that we are in a strong position — America is in a position of weakness.”

Trump has given several reasons for his stiff tariffs, including to bring manufacturing jobs back to the United States, which is a process that could take years. Trump has also justified the tariffs as a matter of addressing American trade deficits — which most economists say is not a sign of economic health in and of itself. In the case of Canada and Mexico, he has sought to use tariffs to try to curb the flow of fentanyl into the U.S., even though drug interdictions from Canada into the U.S. are relatively low.

Jared Bernstein, former chair of president Joe Biden’s Council of Economic Advisers, told CBC News Network that the Trump administration’s tariff policy is built on an “alternate reality” where trade deficits are negative and something other nations deserve to be punished for.

“Until they’re willing to bend … their alternate reality to the actual reality, which is exactly what the markets are responding to, I think we’re gonna just be looking at more of this kind of volatility and disruption,” Bernstein said of the tumult on Wall Street.

JPMorgan Chase CEO Jamie Dimon, in his much-read annual note to shareholders early Monday, cautioned investors that the turmoil caused by U.S. tariffs and a global trade war could slow growth in the world’s largest economy, spur inflation and potentially lead to lasting negative consequences.

“The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse,” the CEO wrote.

JPMorgan’s economists raised the risk of a U.S. and global recession this year to 60 per cent from 40 per cent after Trump unveiled the steepest trade barriers in more than 100 years last week.

Dimon in January said critics of Trump’s tariffs needed to “get over it,” though he did allow at the time they would have to be implemented carefully.

WATCH | Trump’s tariff math, explained:

The bizarre way Trump’s team calculated reciprocal tariffs | About That

After much internet speculation, the White House confirmed the math behind U.S. President Donald Trump’s reciprocal tariffs. Andrew Chang breaks down the formula used to determine what each country owes and explains why the math is misleading.

Images supplied by Reuters, Getty Images and The Canadian Press.

The U.S. Federal Reserve could cushion the blow of tariffs on the American economy by cutting interest rates, which Trump in a social media post early Monday argued for. That can encourage companies and households to borrow and spend. But Fed chair Jerome Powell said Friday that the higher tariffs could drive up expectations for inflation and lower rates could fuel still more price increases. 

U.S.-listed shares of crypto companies also tumbled before the markets opened on Monday. Bitcoin fell as much as 5.5 per cent on Monday to hit its lowest in 2025, and was last trading 2.1 per cent lower.

On Friday, the worst market crisis since the COVID-19 pandemic shifted into a higher gear as the S&P 500 plummeted six per cent and the Dow plunged 5.5 per cent. The Nasdaq composite dropped 3.8 per cent. 

“There’s no sign yet that markets are finding a bottom and beginning to stabilize,” wrote Deutsche Bank analysts in a research note.

Global markets tumble

Chinese markets often don’t follow global trends, but they also tumbled. Hong Kong’s Hang Seng dropped 13.2 per cent, while the Shanghai Composite index lost 7.3 per cent. In Taiwan, the Taiex plummeted 9.7 per cent, while South Korea’s Kospi lost 5.6 per cent.

On Monday, Beijing struck a note of confidence even as markets in Hong Kong and Shanghai tumbled. The People’s Daily, the Communist Party’s official mouthpiece, had strong words. 

“The sky won’t fall,” it declared, even if the U.S. tariffs have an impact. “Faced with the indiscriminate punches of U.S. taxes, we know what we are doing and we have tools at our disposal,” it added.

Tokyo’s Nikkei 225 index lost nearly 8 per cent shortly after the market opened and futures trading for the benchmark was briefly suspended. It closed down 7.8 per cent. 

European shares followed Asian markets lower, led by Germany’s DAX index, which briefly fell more than 10 per cent at the open on the Frankfurt exchange, but recovered some ground ground to move down 4.8 per cent in midday trading.

In Paris, the CAC 40 shed 5.1 per cent, while Britain’s FTSE 100 lost 4.9 per cent.

Nathan Thooft, chief investment officer and senior portfolio manager at Manulife Investment Management, said more countries are likely to respond to the U.S. with retaliatory tariffs. Given the large number of countries involved, “it will take a considerable amount of time in our view to work through the various negotiations that are likely to happen.”

“Ultimately, our take is market uncertainly and volatility are likely to persist for some time,” he said.

Oil prices plummet

A barrel of benchmark U.S. crude oil briefly dropped below $60 for the first time since 2021. Benchmark Brent crude is down by nearly 15 per cent over the last five days of trading, with a barrel of oil costing just over $63 US. That’s down nearly 30 per cent from a year ago.

Middle East stock markets tumbled Monday as they struggled with the dual hit of the United States’ new tariff policy and a sharp decline in oil prices.

That cost per barrel is far lower than the estimated break-even price for Saudi Arabia and most other countries producing energy in the Middle East. That’s coupled with the new tariffs, which saw the Gulf Cooperation Council states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates hit with 10 per cent tariffs. 

“With these measures and the expected retaliatory measures that could be adopted by other countries, the stability and predictability of international trade could be undermined,” the accounting firm PwC said in an advisory to its Mideast clients.