The US stock market continued its turbulent decline on Tuesday, driven by President Donald Trump’s latest escalation in his ongoing trade war with Canada, one of America’s most significant economic partners. Wall Street tumbled further, with the S&P 500 plunging 1.1% in afternoon trading — extending a relentless selloff that has now dragged the index nearly 10% below its all-time high reached just weeks ago. The trigger this time came after Trump announced plans to double proposed tariffs on Canadian steel and aluminum imports to a hefty 50%, citing retaliatory actions taken by a Canadian province. This abrupt and aggressive move stoked fears of worsening economic fallout and heightened tensions between the two close allies.
Trading remained frenzied and unpredictable, with the S&P 500 initially showing a modest gain in the morning before swiftly reversing course, spiraling to a sharp 1.2% loss. Such stomach-churning swings have become alarmingly frequent, marking the seventh time in the last eight trading sessions that the index has moved at least 1% in either direction. The volatility reflects Wall Street’s deepening uncertainty over how much economic pain Trump is willing to inflict — both domestically and globally — to pursue his vision of remaking international trade agreements.
In an extraordinary and provocative statement, Trump suggested an unprecedented solution to the ongoing tensions: “The only thing that makes sense is for Canada to become our cherished Fifty First State. This would make all tariffs, and everything else, totally disappear.” The remark stunned political analysts and market watchers alike, adding an extra layer of chaos to an already tense situation.
Beyond the tariffs themselves, the economic damage is magnified by the widespread confusion and fear rippling through American businesses and households. Tariffs inherently raise costs for US consumers and disrupt global supply chains — but even before those impacts fully materialize, the sheer uncertainty of Trump’s ever-changing policies has created a chilling effect on investment and spending. The constant back-and-forth, paired with the president’s unpredictable rhetoric, risks paralyzing corporate decision-making and consumer confidence, potentially pushing the economy closer to recession territory.
Delta Air Lines provided a stark illustration of this emerging trend. The airline warned late Monday that it’s already witnessing a significant dip in customer confidence, translating to weaker demand for last-minute bookings. As a result, Delta slashed its revenue growth forecast for the first quarter of 2025, cutting expectations to 3% to 4% from an earlier range of 7% to 9%. The news sent Delta’s stock diving 8.5%. Southwest Airlines echoed this sentiment, lowering its revenue outlook as well, pointing to multiple factors: reduced government travel, widespread wildfires in California, and a broader “softness in bookings and demand trends as the macro environment has weakened.” Surprisingly, Southwest’s stock bucked the trend, surging 8.7% after the airline announced plans to introduce baggage fees for certain passengers and unveiled new incentives to reward its most loyal customers — a sign that investors may be hoping for improved profitability despite falling demand.
Tech stocks, long seen as the market’s pillar of strength, showed a mixed performance. Oracle tumbled 3.7% after the tech giant reported weaker-than-expected revenue and profits, underlining the sector’s vulnerability in the current economic climate. However, some Big Tech names, which have endured months of relentless selling, showed signs of life. Tesla, for instance, climbed 2.1% after Trump publicly endorsed CEO Elon Musk, declaring he would personally purchase a Tesla to support “Elon’s ‘baby.’” Despite this short-term bump, Tesla remains under heavy pressure, with its stock down a staggering 43.8% this year, battered by slumping sales, negative publicity, and Musk’s controversial push to slash federal government spending.
Other tech heavyweights — which had previously propelled the S&P 500 to record highs — showed tentative signs of stabilization. Nvidia edged up 1%, trimming its year-to-date losses to 19.6%. The chipmaker, a poster child for Wall Street’s recent artificial intelligence mania, has seen its stock fall sharply as investors grow wary of valuations that soared during the AI boom.
Still, Citi strategists remain cautiously optimistic about the long-term outlook for AI and Big Tech, asserting that the “AI bubble is not fully played out.” They argue that the same tech giants that dominated last year’s rally — Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla — could once again lead the market higher. However, they tempered their forecast with a warning: “US exceptionalism is at least pausing,” signaling that any meaningful recovery might be a longer-term play rather than an immediate rebound.
Global markets, which have largely outperformed the US so far this year, also struggled on Tuesday. Major indexes fell across Europe and Asia. The Shanghai Composite managed a modest 0.4% gain, while Hong Kong’s Hang Seng Index remained virtually flat. Both markets seemed steadied by China’s annual national congress wrapping up with measures aimed at bolstering its slowing economy — though analysts noted the policies were relatively modest.
In the bond market, Treasury yields showed some stability after months of steady declines, fueled by mounting recession fears. The yield on the benchmark 10-year Treasury note ticked up to 4.24% from 4.22% late Monday — still far below January’s peak of nearly 4.80%. This slight rise hints at lingering optimism that the US economy may yet avoid a full-blown downturn, though the bond market’s overall trajectory remains pessimistic.
Meanwhile, a new report from the Labor Department delivered a mixed snapshot of the job market. It showed US employers posted 7.7 million job openings at the end of January, precisely matching economists’ expectations. While the figure signals that the job market remains relatively resilient — especially considering the economic headwinds — analysts warned that hiring could slow if businesses pull back further on spending and expansion plans amid ongoing uncertainty.
As Wall Street grapples with a barrage of unsettling developments — from escalating trade wars to unpredictable policy shifts and weakening corporate earnings — investors are left wondering how much longer the market can withstand the relentless pressure. The coming weeks could prove crucial, with earnings reports, economic data, and geopolitical tensions all converging into what may be a decisive moment for the US economy’s near-term trajectory.
