Topline
Stocks dropped again Tuesday as President Donald Trump’s tariffs sparked queasiness on Wall Street, sending two major indexes to their lowest levels since before the November election.
Traders work the floor of the New York Stock Exchange on Tuesday.
Key Facts
The S&P 500, the most commonly cited U.S. stock benchmark, fell 1.2% Tuesday, the blue chip Dow Jones Industrial Average declined 1.6%, or 670 points, and the tech-concentrated Nasdaq dipped 0.4%.
The S&P and Nasdaq closed at their lowest levels since Nov. 4, the day before Election Day, while the Dow closed at its lowest level since Jan. 14.
The CBOE Volatility Index (VIX), often referred to as Wall Street’s fear gauge as it tracks moves in S&P options trading, rose Tuesday to its highest level since mid December.
Equities came back in afternoon trading, as the Dow and S&P trimmed losses to just a 0.3% daily loss by about 3:30 p.m. EST, while the Nasdaq rose 0.7%, before all turned sharply negative.
Bank of America, Tesla, JPMorgan Chase and Disney were among the big name stocks which declined at least 3%.
Key Background
The S&P suffered its worst loss of 2025 on Monday. Most of the selloff followed Trump’s confirmation he planned to enact his 25% tariffs on Canadian and Mexican imports and 10% additional tariffs on Chinese goods, levies which went into effect Tuesday morning.
Crucial Quote
“Markets dislike uncertainty,” Morgan Stanley Wealth Management strategist Daniel Skelly wrote in emailed comments ahead of the turnaround. In a prescient morsel of hope, Skelly continued, “it remains to be seen whether some of the bearishness surrounding these tariffs will dissipate now that they’ve actually been implemented.”
What To Watch For
The Nasdaq was on the cusp of entering a 10% correction, trading as much as 9.9% below its record close last month. Following the afternoon recovery, the Nasdaq is down 8.8% from its peak.
Tesla Stock Still Declines
Tesla, the electric vehicle firm run by Trump’s top lieutenant Elon Musk, also the world’s richest man, closed nearly 45% below its record high set in December.
How Do Tariffs Impact Stocks?
Tariffs can hurt companies’ financial performance in several ways. If American consumers curtail spending in response to higher prices, that would eat into revenue. If companies absorb the costs of tariffs, that would cut into domestic profit margins. If companies’ goods sold abroad are priced less competitively in response to any retaliatory tariffs, that may hurt non-U.S. sales. Stocks are already valued at a historically stretched ratio compared to earnings, a recipe for vulnerability upon an event shaking market confidence.
How Will This Batch Of Tariffs Impact Inflation?
The 10% duty on Chinese goods will boost U.S. core prices by 0.1% and the 25% levy on Canadian and Mexican imports will up core prices by 0.6%, estimated Goldman Sachs economist Alec Phillips in a Monday note to clients. A roughly 0.7% increase to core prices would reverse recent progress on inflation, which has been above the 2% ideal level for nearly four years straight.