Dow drops 600 points after U.S. hits key trade partners with tariffs: Live updates

Stocks dropped to kick off February after President Donald Trump hit several key U.S. trading partners with tariffs, raising fears that a full-blown trade war would disrupt global supply chains, reignite inflation and slow the economy.

The Dow Jones Industrial Average traded 613 points lower, or 1.4%. The S&P 500 shed 1.6%, marking a broad sell-off as about 450 members of the index were in the red. The Nasdaq Composite slid 1.9%.

The impact from the new tariffs ricocheted around the globe in a risk-off move:

President Donald Trump on Saturday slapped a 25% tariff on goods from Mexico and Canada. He also placed a 10% levy on imports from China. Energy imports from Canada received a lower 10% tariff. Canada responded with retaliatory tariffs of its own, while Mexico said it would explore levies on U.S. imports. The Chinese government, meanwhile, said it would file a lawsuit with the World Trade Organization.

Trump also signaled over the weekend that tariffs on the European Union would be imposed next.

“While the direct impact on U.S. growth from the announced tariffs is still quite modest, the risk is that these policy shifts amplify concerns about future trade policy risks and potential retaliation,” wrote Goldman’s Dominic Wilson in a Sunday note. “The actions may also challenge the market’s confidence that the Administration will avoid policies that push growth lower or inflation higher.”

U.S. automakers with big North American supply chains led the decline, with General Motors shares off by 5% and Ford down by 4%. Auto suppliers including Aptiv and Avery Dennison lost 8% and 2%, respectively. Engine maker Cummins lost 2%.

Constellation Brands, a large importer of alcohol from Mexico, tumbled 4%. Shares of Chipotle, which imports avocados from Mexico, lost 2%. Nike was down 4%, while fellow clothing maker Lululemon shed 3%.

While a big sell-off for sure, the market was above what the worst overnight futures trading levels indicated, with investors hoping tariffs would be a negotiating tool used by Trump.

“Call us deluded, but we still think that permanent tariffs on the U.S.’s allies (Canada, Mexico) will not be a thing,” said Thierry Wizman, global FX and rates strategist at Macquarie. “That’s because concessions are an ‘easier’ way to deal with Trump’s ‘problems’ (from a cost-benefit and game-theoretic perspective), and Trump likes to make ‘deals’. Political and market pressure will also weigh on the parties to make concessions, as in 2018.”

The emerging trade war comes as investors are dealing with the biggest stretch for fourth-quarter earnings reports and a key economic reading on the labor market this week. More than 120 companies in the S&P 500 are set to report their results, including tech names Alphabet, Amazon and Palantir, as well consumer giants, including Walt Disney and Mondelez.  The January nonfarm payrolls report will be out Friday with economists polled by Dow Jones expecting that 175,000 jobs were added last month.