Stock Market Plunges After White House Confirms Tariffs to Begin Saturday

Wall Street saw a reversal of fortunes Friday following the White House's confirmation that President Donald Trump will impose tariffs on several key U.S. trading partners starting Saturday. Initially, the stock market showed promise with early gains in the trading session, but the announcement caused stocks to surrender those gains and turn negative.

By Friday afternoon, the S&P 500 had fallen by 0.5 percent and the Nasdaq composite dropped by 0.4 percent after both had solid gains during morning trading. The Dow Jones Industrial Average did not fare any better, slipping by 0.7 percent.

Newsweek reached out to the White House via email Friday afternoon for comment.

Why It Matters

Trump will implement a 25 percent tariff on imports from Canada and Mexico, and 10 percent on goods from China, effective this Saturday, the White House said. It did not specify whether any exemptions would be made. The move could lead to rapid price increases for U.S. consumers.

The president announced later Friday that additional tariffs are forthcoming, though he provided limited details. "We're going to implement tariffs on computer chips, oil, and gas. That should happen fairly soon, likely around February 17th," Trump said, adding that tariffs on copper and the European Union are also expected.

The tariff plan's levies on products from key U.S. trading partners aim to address what the administration views as unfair trade practices. But critics argue that such measures could harm U.S. businesses and consumers by increasing costs and disrupting supply chains.

The market reaction underscores investor anxiety about the potential economic impact of the tariffs. Historically, trade tensions and the imposition of tariffs have led to market volatility as investors weigh the implications for global trade and economic growth.

China reacted strongly to the tariffs imposed by Trump on Chinese goods during his first term, specifically targeting his supporters in rural America through retaliatory taxes on U.S. farm exports.

What To Know

The tariff announcement comes at a time when the global economy is already facing challenges. Recent economic data has indicated slowing growth in several major economies, adding to the uncertainties. Market analysts are now closely monitoring the situation to determine the long-term impacts of these trade policies.

The market volatility is also influenced by mixed corporate earnings reports. While some companies have reported better than expected results, others point to ongoing challenges, including increased costs and uncertainties in the trade environment, as factors affecting their performance.

Currency markets reacted to these developments as well, with the U.S. dollar showing signs of strengthening against major currencies. Investors often flock to the dollar in times of uncertainty as a safe-haven asset. However, a stronger dollar can also have mixed effects on the U.S. economy, potentially affecting exports by making American goods more expensive for foreign buyers.

As a backdrop to these economic concerns, Federal Reserve policies remain a focal point for market participants. On Wednesday, the Fed paused its interest rate cutting, leaving its benchmark rate the same after dropping it three times in 2024.

Any signals from the Fed regarding future interest rate moves and monetary policy adjustments will be scrutinized for indications of how the central bank plans to navigate the complex economic landscape.

The end of a rocky week for tech

On Monday, tech stocks globally tumbled following an announcement by Chinese startup DeepSeek. The company revealed that it developed a large language model capable of competing with the best in the world, without relying on top-tier chips.

By Monday morning, DeepSeek had already reached the top of the chart for free apps on Apple's App Store. Analysts noted that this achievement is especially remarkable considering the restrictions the U.S. government has placed on Chinese access to top-tier AI chips.

This disruption raised questions about the necessity of the extensive investments anticipated for AI chips, data centers, and electricity. Shares of Nvidia, often seen as a leader in the AI sector, fell 3.7% and recorded a 15.8% decline for the week. Nvidia's CEO, Jensen Huang, was scheduled to meet with President Trump in Washington on Friday.

What People Are Saying

White House press secretary Karoline Leavitt told reporters on Friday: "Starting tomorrow, those tariffs will be in place. These are promises made and promises kept by the president."

Wendy Cutler, a former U.S. trade negotiator, told the Associated Press: "We should expect all three countries to retaliate."

What Happens Next

Traders and investors are taking a cautious stance, seeking clarity on the full scope and implementation of the tariffs while bracing for potential market fluctuations ahead.

The evolving trade policies and their ramifications will likely remain a significant driver of market sentiment and performance in the coming days and weeks.

The Associated Press contributed to this story.

Update: 1/31/25, 5:35 p.m. ET: This article has been updated with additional information.

Update: 1/31/25, 5:58 p.m. ET: This article has been updated with additional information.