Stocks Plunge Amid Escalating Trade War Between U.S. and Canada

U.S. stocks took a major hit this week as the ongoing trade tensions between the United States and Canada intensified. The Dow Jones Industrial Average fell nearly 600 points on Tuesday, with the S&P 500 approaching correction territory as well.

The catalyst for the latest market downturn was President Trump's decision to hike tariffs on imports of steel and aluminum from Canada to 50%. This came in response to the Canadian province of Ontario imposing a 25% surcharge on electricity exports to the U.S.

Trump also threatened to "substantially increase" other tariffs on Canada if the country does not rescind tariffs on U.S. dairy products and other goods. This new round of escalation has created significant uncertainty for investors, who are now left to wonder what retaliatory actions Canada may take on April 2nd.

"The market has been down for three weeks in a row, largely driven by uncertainty about where trade policy lands, full stop," said Art Hogan, chief market strategist at B. Riley Wealth. "Unless and until we know where the goal posts actually are on trade and tariffs, this uncertainty will continue to weigh on markets."

The hardest-hit sectors included energy, materials and industrials, as these industries are most directly impacted by trade tensions and tariff policies. Shares of automaker Stellantis, which has multiple production plants in Canada, also tumbled on the news.

Concerns about the broader economy have added to the market's woes. Guidance from Delta Air Lines indicating weaker U.S. demand has fueled recession fears, while Citigroup strategists have lowered their view on U.S. equities for 2025.

With the U.S. and Canada seemingly far apart on resolving their trade disputes, investors can expect continued volatility in the markets until there is more clarity on the future direction of trade policy between the two North American neighbors.