Stocks tumbled on Tuesday as President Trump’s broad tariffs against Canada, Mexico and China reverberated through global markets, intensifying investors’ concerns over the health of the economy.
The S&P 500 fell over 1 percent, adding to Monday’s 1.8 percent loss, which was its sharpest decline this year. The Nasdaq Composite index dropped roughly 1 percent, putting it briefly in what is known as a correction — a drop of 10 percent or more from its recent peak.
The sharp moves in recent days have wiped out much of the stock gains made since Mr. Trump’s election victory in November, as investors’ hopes of deregulation, business-friendly policies and restraint on tariffs have given way to fears over the potentially damaging impact of the levies that went into effect on Tuesday.
Investors appeared to rush into the safety of government debt, helping to lower the yield on the 10-year Treasury note to its lowest level since October. Yields move inversely to prices.
Mounting concerns about the economy’s ability to withstand incoming tariffs for too long were also evident in a shift in investor expectations of the number of times the Federal Reserve will cut interest rates.
In the near term, tariffs are likely to accelerate inflation, with the Fed holding rates elevated to deal with it. But the longer-term effect, economists say, will be slower economic growth and the risk of an economic downturn, in which the Fed would very likely rapidly cut interest rates.
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