Stock market today: Wall Street falls sharply after Trump announces Canadian and Mexican tariffs

NEW YORK (AP) — U.S. stocks are falling sharply Monday after President Donald Trump said tariffs he announced on Canada and Mexico will take effect on Tuesday. The bond market also took a hit following the latest warning signal on the strength of the U.S. economy.

The S&P 500 was down 1.7% in late trading. After initially holding steady at the open of trading, the index drifted through the morning before turning lower in the afternoon. Losses accelerated after Trump said 25% tariffs he had earlier announced on Canada and Mexico will take effect on Tuesday.

The Dow Jones Industrial Average was down 639 points, or 1.5%, with a little more than an hour remaining in trading, and the Nasdaq composite was 2.3% lower.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Stocks fell on Wall Street Monday, ahead of President Donald Trump’s latest deadline on tariffs.

The S&P 500 was 1% lower in afternoon trading. The Dow Jones Industrial Average was down 402 points, or 0.9%, as of 1:56 p.m. Eastern time, and the Nasdaq composite was 1.5% lower.

Wall Street is coming off a rocky couple of weeks, starting after the S&P 500 set a record following a parade of fatter-than-expected profit reports from big U.S. companies. Then, the market dove sharply amid several weaker-than-expected reports on the U.S. economy, including a couple showing U.S. households are getting much more pessimistic about inflation because of the threat of tariffs.

The latest report to show less economic strength than expected came Monday on U.S. manufacturing. Overall activity is still growing, but not by quite as much as economists had forecast. Perhaps more discouragingly, manufacturers are seeing a contraction in new orders. Prices, meanwhile, rose amid discussions about who will pay for Trump's tariffs.

“Demand eased, production stabilized, and destaffing continued as panelists’ companies experience the first operational shock of the new administration’s tariff policy,” said Timothy Fiore, chair of the Institute for Supply Management's manufacturing business survey committee.

A set of tariffs announced by Trump on Canada, Mexico and China is set to take effect on Tuesday, but he has shown he can pull back on such announcements at the last minute. That’s what he did a month ago, when he delayed implementation of the taxes on imports from Canada and Mexico.

The hope on Wall Street is that Trump is using the threat of tariffs as a tool for negotiations and that he’ll ultimately go through with policies that would mean less damage for the global economy and trade. Tariffs could raise prices on everyday items even more for U.S. households, when high inflation has proven to be stubborn to subdue fully.

The market's recent slump has hit Nvidia and some other formerly high-flying areas of the market particularly hard. They lost more ground on Monday, with Nvidia down 6.8% and Elon Musk’s Tesla down 1.9%.

Elsewhere on Wall Street, Kroger fell 2.3% after the grocery chain’s Chairman and CEO Rodney McMullen resigned following an internal investigation into his personal conduct.

Stocks of companies enmeshed in the cryptocurrency economy initially did better, but are are also now falling after Trump said over the weekend that his administration was moving forward with a crypto strategic reserve.

MicroStrategy, the company that's now known as Strategy and has been raising money to buy bitcoin, fell 0.3%. Coinbase, the crypto trading platform, fell 1.4%.

Tuesday will bring not only potentially new tariffs but also earnings reports from several big U.S. retailers, including Target, Best Buy, Ross Stores and AutoZone.

Such reports are always highly anticipated because they can shed light on how well U.S. consumers are doing, and spending by U.S. households is the main engine for the world’s largest economy. But these reports could carry extra resonance following data showing U.S. households may not be waiting for tariffs to hit to change their behavior.

Across the Pacific in China, manufacturers reported an uptick in orders in February as importers rushed to beat higher U.S. tariffs and a Chinese state media report said that Beijing was considering ways to retaliate.

Trump had imposed a tariff of 10% on imports from, China and that's scheduled to rise to 20% beginning Tuesday. He also ended the “de minimis” loophole that exempted imports worth less than $800 from tariffs.

In Hong Kong, Chinese bubble tea chain Mixue Bingcheng’s stock soared 43% following its $444 million debut on the market. The company claims to be the world’s largest food retail chain, with more than 45,000 outlets, and its jump came as the Hang Seng index rose 0.3%.

Indexes rose by even more across Europe and in Tokyo. European markets leaped after a report showed an easing of inflation in February. That should help the European Central Bank, which investors widely expect will deliver another cut to interest rates later this week.

Germany’s DAX surged 2.6%, and France’s CAC 40 jumped 1.1%. Stocks outside the United States have performed better than the S&P 500 this year, even with Trump’s promises for “America First” policies

In the bond market, the yield on the 10-year Treasury fell to 4.18% from 4.24% just before the manufacturing report's release. It's come down sharply since January, when it was approaching 4.80%, as worries have built about the possibility of a slowing U.S. economy.

Often, falls in Treasury yields can give a boost to stock prices because they make loans cheaper to get and give a boost to the economy. But the reason for this recent drop in yields, softer economic growth expectations, mean that's not the case this time, according to Morgan Stanley strategists led by Michael Wilson.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.