At the Beginning of March, Trump's Tariffs Rattled the Stock Market, Causing Its Biggest Drop in Months

U.S. stocks faced another sharp decline on Monday, as a surprise announcement on tariffs from President Donald Trump sent markets reeling. The S&P 500 recorded its steepest daily drop in months, with investors reacting negatively to the news.

‍

After a volatile February, which saw the Nasdaq Composite pull back significantly from its January highs, selling pressure intensified as March trading began. According to Ryan Detrick, chief market strategist at Carson Group, Monday marked the second-worst first trading day of March on record, trailing only the dramatic downturn on March 1, 2009.

‍

The Nasdaq Composite, dominated by technology stocks, slid 2.6% to close at 18,350.19—its lowest level since November 4. All members of the "Magnificent Seven" group of major tech firms saw their shares decline, with Nvidia taking the hardest hit, falling nearly 10%.

‍

The S&P 500 also suffered, dropping 1.8% to 5,849.72. This marked its worst performance since December 18, when the Federal Reserve unsettled investors by signaling that it had no immediate plans to continue cutting interest rates in 2025. The Dow Jones Industrial Average fell 649.67 points, or 1.5%, to settle at 43,191.24—its worst session since February 21.

‍

Smaller stocks fared even worse. The Russell 2000, which tracks small-cap stocks, declined 2.8% to 2,102.23, making it the only major index to underperform the Nasdaq.

‍

The day started on a more positive note, with stocks opening higher. However, investor sentiment quickly soured after the Institute for Supply Management (ISM) released its latest manufacturing activity report. While the overall index remained in positive territory for February, the prices-paid component surged to a 33-month high of 62.4%, raising inflation concerns. Meanwhile, the new orders sub-index dropped below 50%, suggesting potential economic challenges ahead.

‍

This data added to a series of worrisome economic indicators, including weak consumer sentiment and slowing growth in the services sector. These reports had already shaken confidence in the strength of the economy over the past few weeks.

‍

The market’s biggest decline came later in the day after President Trump, during a press briefing, declared that there was “no room left” to delay 25% tariffs on Canada and Mexico. Some analysts, including futures trader Adam Mancini, likened the announcement to a "tariff tape bomb" that rattled investors.

‍

Trump had initially signed an order to implement the tariffs last month but postponed them after negotiating concessions on border security with leaders from both countries. Now, it appeared that the tariffs would take effect the following day.

‍

Additionally, the White House announced that Trump had signed an order imposing an extra 10% tariff on imports from China, in addition to the 10% levy introduced the previous month. This further heightened concerns about trade tensions and their potential impact on economic growth.

‍

“The market’s immediate reaction shows just how uncertain investors are about the direction of trade policy,” said Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners. “There’s been ongoing debate about whether these tariffs are part of a broader negotiation strategy. But the recent market movements indicate a growing vulnerability to a larger correction.”

‍

As if the tariff news wasn’t enough, Trump also posted on Truth Social about new levies on “external” agricultural products, set to take effect on April 2. The wording left some investors confused about whether he was referring to import duties or new fees on U.S. agricultural exports.

‍

Adding to market jitters, the latest reading from the Atlanta Federal Reserve’s GDPNow model projected that U.S. GDP would shrink by 2.8% in the first quarter. Concerns about stagflation—a mix of weak growth and persistent inflation—have weighed heavily on markets in recent weeks.

‍

With stocks under pressure, speculation grew about whether Trump might change course to stabilize financial markets. However, Citigroup’s head of equity trading, Stuart Kaiser, suggested that investors shouldn’t expect a quick reversal.

‍

“Our view is that the administration is prioritizing long-term economic adjustments, including addressing budget deficits and trade imbalances,” Kaiser said. “If that’s the case, they may be more willing to tolerate short-term market declines to achieve those broader goals.”

‍

In the bond market, Treasuries rallied on Monday as investors sought safer assets. Meanwhile, Bitcoin tumbled, reversing gains made after Trump hinted on Truth Social that his proposed strategic cryptocurrency reserve was progressing.

‍

Bitcoin’s price fell nearly 9% to $85,936, marking its steepest one-day percentage drop since August 5, according to Dow Jones data.

‍

With mounting economic concerns, uncertainty over trade policy, and fears of a potential slowdown, investors remained on edge as they assessed what could come next for the markets.

‍