Futures for Wall Street’s main indexes tumbled on Monday as fears of a full-blown trade war and its impact on the global economy jolted markets around the world after President Donald Trump levied steep tariffs on Mexico, Canada and China.
Over the weekend, Trump imposed hefty new tariffs of 25% on imports from Mexico and Canada, and 10% on China – which he said may cause “short-term” pain for Americans.
“Breaking global trade may seem like the thing to do to resurrect the US industrial economy, a noble ambition, but, break trade and you disrupt global capital flows necessary to finance the US budget deficit,” an analyst at GlobalData TS Lombard wrote in a note.
Trump said he would talk on Monday with the leaders of Canada and Mexico, which have announced retaliatory tariffs, but downplayed expectations that they would change his mind.
The iShares MSCI Mexico ETF lost 3.5% in premarket trading, while an ETF tracking Canada slipped 2.2%.
At 07:12 a.m. ET, Dow E-minis were down 612 points, or 1.37%, S&P 500 E-minis were down 97.5 points, or 1.61% and Nasdaq 100 E-minis were down 403.75 points, or 1.87%.
Futures for the economically-sensitive Russell 2000 smallcaps index slumped more than 2%.
Most chip stocks slumped, with industry bellwether Nvidia sliding 3.6%, while other growth stocks lost ground, with Apple and Microsoft down more than 1% each.
Legacy automakers Ford dropped 4%, while General Motors shed 7.1%. EV maker Tesla lost 3%.
The Cboe Volatility Index, known as Wall Street’s “fear gauge”, jumped to its highest level in a week.
Trump also warned that tariffs on Europe will “definitely happen”, but did not offer any clarity over his plans. The pan-European STOXX 600 was last down 1.3%.
Goldman Sachs estimates that every 5-percentage-point increase in the tariff rate would lower the S&P 500’s earnings per share by roughly 1% to 2%.
The brokerage said the latest tariff announcements could bring about a reduction in its forecasts for the S&P 500’s earnings by roughly 2% to 3%.
Meanwhile, the quarterly earnings remain in full swing, with some prominent companies including Google-parent Alphabet , chipmaker AMD, payments platform PayPal and drugmaker Eli Lilly reporting results this week.
Of the 178 companies in the S&P 500 that have reported earnings so far, more than 75% of them beat analyst estimates, as per data compiled by LSEG.
Later in the day, a January manufacturing activity reading is expected. The January non-farm payrolls report is also due this week on Friday.
Among other movers, cryptocurrency and blockchain-related stocks dropped as bitcoin prices tumbled in a global risk-off move.
Exchange operator Coinbase and the largest corporate holder of bitcoin, MicroStrategy, tumbled almost 6% each.
Triumph Group jumped 34.1% after the aircraft parts maker said investment firms Warburg Pincus and Berkshire Partners have agreed to buy the company in a deal valued at about $3 billion.