In a significant turn of events, US equity indexes edged lower on Tuesday following retaliatory actions from Canada and China against the Trump administration's recent trade tariffs. This geopolitical tension is accompanied by a commitment from Mexico to respond in kind, adding further complexity to the North American trade landscape. The Nasdaq Composite recorded a decline of 0.3%, settling at 18,298.1, while the S&P 500 fell by 0.9% to reach 5,797.2.
Notably, the Dow Jones Industrial Average dropped 1.2%, landing at 42,701.8 around midday, with both the Nasdaq and the S&P 500 experiencing earlier dips of over 1.5%. The Chicago Board Options Exchange's volatility index, known as the VIX and often referred to as the fear gauge, rose by 3% to 23.47, having soared more than 11% at one point during the day. In a bold move, President Donald Trump enacted substantial tariffs—25% on imports from Canada and Mexico—alongside a hike of duties on goods imported from China, raising them to 20%.
In response, Canada has initiated a series of retaliatory tariffs targeting $30 billion worth of US goods, with plans to escalate these levies to $155 billion. China has also imposed tariffs ranging from 10% to 15% on US food and agricultural exports and has enforced export and investment restrictions on 25 US companies, revealing the sharp end of the trade war. Mexican President Claudia Sheinbaum indicated that her administration would undertake countermeasures, although immediate details were not released, as reported by Reuters.
The potential repercussions of these retaliatory tariffs could severely impact American agricultural exports and auto parts, particularly for industries relying on North American trade agreements, as highlighted in an analysis by deVere Group. Stifel's Chief Economist, Lindsey Piegza, noted in a statement that "the latest moves are expected to create ripples in the relationship with the country's largest trading partners and, at least in the near term, potentially result in some supply chain disturbances and/or add additional price pressures, with roughly $1.5 trillion in goods potentially impacted." On the economic front, Redbook US same-store sales showcased an encouraging acceleration of 6.6% year over year for the week concluding on March 1, following a 6.2% increase from the prior week. In the realm of US Treasury yields, fluctuations prevailed, with the 2-year yield dipping 4.9 basis points to 3.93%, contrary to the 10-year yield that inched up 1.3 basis points to 4.19%.
Earlier in the session, the 10-year yield had experienced a decrease of about four basis points. Turning to corporate news, Best Buy ($BBY) highlighted looming price increases due to tariff uncertainties alongside a full-year earnings outlook that missed Wall Street's expectations at its midpoint. Consequently, its shares faced a significant decline of 12% intraday, ranking as the worst performer on the S&P 500. Meanwhile, Tesla ($TSLA) reported a stark decline of 49.2% in sales of China-made electric vehicles for February, totaling 30,688 units compared to the previous year, as cited by the China Passenger Car Association.
This drop triggered a nearly 4% slump in Tesla's shares, placing it among the steepest decliners on the Nasdaq. Conversely, Walgreens Boots Alliance (WBA) surged by over 7% intraday, emerging as one of the top gainers on the S&P 500 after The Wall Street Journal disclosed that the company is progressing towards completing a $10 billion go-private transaction with private-equity firm Sycamore Partners. In commodity markets, West Texas Intermediate crude oil futures fell by 0.4% to $68.09 a barrel, retreating from session lows.
In contrast, gold futures experienced a 0.7% rise to $2,922.51, alongside a slight 0.1% increase in silver futures to $32.34..