Markets reel as Trump tariffs take effect

Global financial markets faced a turbulent start to the week as President Donald Trump’s tariffs on China, Canada, and Mexico officially kicked in at midnight on March 4, 2025, marking his boldest move yet to reshape global trade. The S&P 500 suffered its worst selloff of the year on Monday, dropping 1.8%, while the Nasdaq 100 slid 2.2% and the Dow Jones Industrial Average fell 1.5%. A gauge of the “Magnificent Seven” megacaps sank 3.1%, with Nvidia Corp. plunging 8.7%. The selloff erased Friday’s gains, pushing the S&P 500 nearly 5% below its February 19 record high.

The trigger? Trump’s executive order doubling tariffs on Chinese exports to 20%, alongside 25% levies on Canada and Mexico—moves targeting roughly $1.5 trillion in annual imports. Trump justified the China tariff hike by pointing to insufficient action on fentanyl flows, while signaling no room for negotiation with Canada or Mexico. In response, China retaliated with tariffs up to 15% on US agricultural goods like soybeans, chicken, and cotton, effective March 10, and banned exports to select US defense firms. Analysts see China’s response as measured, leaving room for dialogue, which helped Chinese stocks recover intraday losses.

Economic data signals caution

Adding to market jitters, US economic indicators continue to soften. Monday’s ISM manufacturing index slipped to 50.3 in February, teetering near stagnation, with new orders contracting (48.6) and employment weakening (47.6). Meanwhile, the prices-paid index surged to 62.4—the highest since June 2022—reflecting tariff-driven cost pressures on steel, aluminum, and other inputs. Separate data showed construction spending dipped 0.2% in January, prompting the Atlanta Fed’s GDPNow model to forecast a 2.8% annualized GDP decline for Q1, down from -1.5%.

This follows a string of disappointing reports—rising unemployment claims, weaker housing, and a sharp drop in consumer spending—raising concerns about a potential US slowdown. Goldman Sachs CEO David Solomon, speaking in Sydney, pegged recession odds as “very small,” but Wall Street remains on edge. Callie Cox of Ritholtz Wealth Management summed it up: “It’s time to be nervous, not bearish.”

Global markets and commodities react

While US equities bore the brunt, Europe bucked the trend with one of its strongest advances of 2025, highlighting a rotation trade favoring international markets. In Asia, focus shifts to China’s National People’s Congress starting Wednesday, where stimulus measures could counter export losses.

Commodities felt the heat too. Oil prices sank to a three-month low, with Brent crude falling 2.1% to $71.26 a barrel after OPEC+ confirmed plans to hike output by 138,000 barrels a day starting in April—yielding to Trump’s pressure to lower prices. Bitcoin tumbled 9.5% to $85,314.51, pulling back from recent highs tied to Trump’s crypto stockpile push. Meanwhile, bonds rallied, with 10-year Treasury yields dropping to 4.16%, and gold rose 1.2% to $2,890.91 an ounce as investors sought safety.

What’s next?

Trump’s speech to Congress tonight could set the tone, with markets hungry for clarity on his trade stance. Key data this week—Friday’s US jobs report, Fed Chair Jerome Powell’s speech, and Eurozone GDP—will also shape sentiment. For now, uncertainty reigns. As Goldman Sachs’ David Kostin noted, any S&P 500 recovery may hinge on an improved economic outlook—a tall order amid tariff wars and softening data.

DXY under pressure again

Despite a rebound in the US Dollar on Friday, it lost all of those gains by Monday, falling back towards 106.40 and approaching its lowest level since December. This reversal supports the bearish outlook indicated by the Time/Price method, suggesting that downside pressure is likely to continue toward 105.50 for the time being.

EURUSD surpasses 1.0500

EURUSD has recovered its losses from last week, trading again above the solid resistance level of 1.0500. It will be important to monitor this level closely over the next few hours. A stabilization above 1.0500 is necessary to pave the way for further gains. If this occurs, the next key levels to watch will be 1.0550 and then 1.0600. The Time/Price method indicates that any potential downside retracement is likely to remain limited above 1.0380 for now.

Short-term rally for Gold

Gold surged earlier today, reaching a height of $2920 due to tariff concerns. This bounce comes after a decline to $2833 on Friday. However, this rally is expected to be short-lived. The Time/Price method suggests that a downside correction for gold is likely to resume towards $2780 over the next two weeks, as long as it does not post a new record above $2956.

Brent at a key support area

Crude oil prices have declined as OPEC+ moves forward with its production hike plans, causing prices to tumble. However, OPEC+ has managed to keep Brent prices above $70 since 2021, and it will be interesting to see how they will handle pricing going forward. The price/time method supports a bearish outlook.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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