US stock futures fall as Trump’s tariffs threaten a dangerous trade war

US stock futures slid Tuesday after President Donald Trump made good on his threat to levy hefty tariffs on Canada and Mexico. Dow futures dropped by around 150 points in premarket trading, and futures tied to the S&P 500 and Nasdaq 100 were both around 0.7% lower.

The 25% tariff on goods imported from the US’s closest trading partners comes after Trump also imposed an additional 10% tariff on Chinese goods, raising that country’s rate to 20%.

The broad-based levies are intended to stem the flow of fentanyl into the United States, the Trump administration said.

However, the impact of tariffs on everyday goods for Americans could stall the economic engine that drives US growth. Inflation-weary consumers are already starting to rein in their spending as uncertainty ripples through households. Layoffs are rising, consumer confidence has plunged, and inflation is still above the Federal Reserve’s target of 2%.

China immediately struck back Tuesday, announcing tariffs on chicken, pork, beef and some agricultural imports from the US, according to a statement from the State Council Tariff Commission. Canada’s Prime Minister Justin Trudeau said hours before the tariffs took effect that Ottawa would immediately respond with tariffs on billions of dollars of US goods.

While Trump has long signaled his intent to impose stringent levies on America’s trading partners, many investors believed the threat of tariffs was a negotiation strategy. But as the deadline neared, fear rose that Trump’s actions would spark a trade war.

That triggered a massive selloff on Wall Street on Monday: The Dow ended the day down by 650 points, the S&P had its worst day since December and the Nasdaq Composite flirted with correction territory.

“While Tuesday’s tariffs are a go, it remains very unclear on just how long these tariffs will remain,” wrote Clark Geranen, chief market strategist at CalBay Investments, in a note Tuesday. “We tend to believe these are more of a negotiation tactic and not the start of a long and drawn out reciprocal trade war. Still, in these situations, investors sell first and ask questions later, as seen during Monday’s selloff.”

Trump is scheduled later Tuesday to deliver to Congress the first address of his second term. The theme of that speech, “Renewal of the American Dream,” comes as the stock market has now erased all gains since he became president and the Federal Reserve Bank of Atlanta’s real-time GDP forecast projects the economy could contract by 2.8%.

This is a developing story and will be updated.