In a significant escalation of trade tensions, Canada and China have declared retaliatory measures in response to the tariffs implemented by the United States. Meanwhile, Mexican President Claudia Sheinbaum announced that Mexico would follow suit this weekend. This development comes after tariffs on Mexico, Canada, and China went into effect on Tuesday, marking a pivotal shift in international trade relations.
The financial markets have responded sharply to the unfolding tariff saga. The S&P 500, which had initially surged by 2.53% on November 6 following then-candidate Trump's election, has now surrendered all of its post-election gains. As of 2025, the index is down 2%, highlighting investor concerns over the potential economic repercussions of the new tariffs. The broader market sell-off saw the S&P 500 closing at 5,732.59 on Tuesday.
Investors had initially anticipated that deregulation and tax cuts would offset any negative impacts from the tariffs. However, recent developments have prompted a reassessment. The Industrial Select Sector SPDR Fund (XLI) has declined over 3% since Election Day, while the Energy Select Sector SPDR Fund (XLE) has slid more than 4%. The small cap Russell 2000 index has been hit particularly hard, dropping approximately 9%.
Amidst this backdrop, the Nasdaq Composite index has entered correction territory, intensifying concerns about the overall health of financial markets. One bright spot remains the Financial Select Sector SPDR Fund (XLF), which is still up over 6% since Election Day, offering a glimmer of hope amidst the broader market downturn.
In response to the U.S. tariffs, Canadian Prime Minister Justin Trudeau has been vocal in opposing the justification provided by the White House, particularly concerning fentanyl-related issues. This pushback underscores the mounting tensions between longstanding trade partners and raises questions about the future of North American trade relations.