NEW YORK (AP) — The threat of a punishing trade war sent Wall Street on a roller coaster Monday. After initially falling sharply on worries about President Donald Trump’s tariffs, U.S. stocks pared their losses after Mexico said it had negotiated a one-month reprieve.
The S&P 500 ended up falling 0.8% after Asian and European indexes logged worse drops. The Dow Jones Industrial Average lost 122 points, or 0.3%, and the Nasdaq composite sank 1.2%.
The U.S. stock market had been on track for a much worse loss at the start of trading on worries about how much pain U.S. companies would feel because of the tariffs. The S&P 500 was briefly down nearly 2%, and the Dow dropped as many as 665 points.
Some of the heaviest losses hit Big Tech and other companies that could be hurt most by higher interest rates that could result from the U.S. tariffs announced on imports from Canada, Mexico and China.
The fear hanging over Wall Street is that Trump’s tariffs could push up prices for groceries, electronics and all kinds of other bills for U.S. households, adding upward pressure on a U.S. inflation rate that’s largely been slowing since its peak three summers ago. Stubbornly high or accelerating inflation could keep the Federal Reserve from cutting interest rates, which it began doing in September to give the U.S. economy a boost. Profits for U.S. companies, meanwhile, could face downward pressure from slowing global trade.
But U.S. stocks pared their losses after Mexican President Claudia Sheinbaum said tariffs on her country’s goods are on hold for a month following a conversation with Trump. The Dow even turned briefly turned higher in the afternoon for a small gain. After the U.S. stock market closed for the day, Canadian Prime Minister Justin Trudeau said a conversation he had with Trump also led to a 30-day pause.
Much of Wall Street had been hoping Trump’s talk of tariffs through the presidential campaign was just that, talk, and an opening point for negotiations with U.S. trading partners instead of a permanent policy. Monday’s swivels on Mexico and Canada leave open the question of whether Trump is using tariffs as merely a tool for negotiations.
But when traders came into Monday morning thinking tariffs were imminent, fear rose quickly about the potential for an escalating trade war that could damage economies worldwide, including the United States.
“Living in the Midwest, I might feel the trade war soonest and most,” said Brian Jacobsen, chief economist at Annex Wealth Management, because of how much crude oil flows over the northern U.S. border to make gasoline. “Our refiners can’t easily switch away from Canadian crude.”