[New York Stock Market] Trump Enforces Mexico and Canada Tariffs, Markets Plunge... Nasdaq Down 2.64%

Trump: "25% Tariffs on Mexico and Canada to Take Effect on the 4th"
Dismisses Possibility of Negotiations... Trade War Fears Spread
Unexpected Weakness in Manufacturing Indicators Raises Economic Downturn Concerns
Attention on U.S. Department of Labor's February Employment Report on the 7th

The three major indices of the U.S. New York Stock Exchange all plunged on March 3, the first trading day of March (local time). Investor sentiment sharply cooled due to fears of a trade war after U.S. President Donald Trump announced that the 25% tariffs on Mexico and Canada, scheduled to take effect on March 4, would be implemented as planned. Manufacturing economic indicators also underperformed expectations, increasing market concerns about an economic downturn.

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On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 43,191.24, down 649.67 points (1.48%) from the previous trading day. The large-cap-focused S&P 500 index fell 104.78 points (1.76%) to 5,849.72, and the tech-heavy Nasdaq index plunged 497.09 points (2.64%) to 18,350.19.

The major indices initially rose in early trading but showed mixed trends before sharply widening their losses following President Trump's afternoon tariff remarks. At the White House event where Trump announced the U.S. investment plans of Taiwan's TSMC, the world's largest foundry (semiconductor contract manufacturer), he responded to reporters' questions about tariffs by saying, "There is no room for negotiation on Mexico and Canada," adding, "Everything is ready, and it will take effect tomorrow."

Earlier, President Trump announced on February 4 that 25% tariffs would be imposed on Mexico and Canada and an additional 10% tariff on China due to issues related to fentanyl and illegal immigration. After Mexico and Canada promised to strengthen border controls, the tariff implementation on these two countries was postponed for one month. The 10% additional tariff on China was implemented as scheduled. Then, on February 27, Trump announced that starting March 4, 25% tariffs would be imposed on Mexico and Canada, and on the same day, an additional 10% tariff would be added on top of the existing 10% tariff on China.

The market had hoped for a last-minute tariff negotiation settlement, but President Trump dismissed the possibility of negotiations that day, spreading fear of a trade war. If President Trump implements the tariff measures on Mexico, Canada, and China as planned, imports worth a total of $1.5 trillion annually are expected to be affected by the tariff increases. If the three countries retaliate, the impact of the tariff war is expected to grow even larger.

Chris Lukki, Chief Economist at FWD Bonds, said, "Tariffs will shock the economy in some way," adding, "We need to see whether the stock market can survive this change."

U.S. manufacturing indicators also disappointed expectations, increasing concerns about economic contraction. On that day, the Institute for Supply Management (ISM) reported that the U.S. Manufacturing Purchasing Managers' Index (PMI) for February was 50.3, down 0.6 points from the previous month. A PMI above 50 indicates expansion, while below 50 indicates contraction. Although the manufacturing sector remains in expansion, the pace was slower than expected, falling short of the forecast (50.6), raising concerns about an economic downturn.

Florian Ielpo, Investment Manager at Lombard Odier, said, "Concerns about a potential U.S. recession are growing in the market," adding, "We need to pay attention to warning signals." He further predicted, "The worsening macroeconomic momentum depending on the employment report on Friday (7th) could limit market progress."

Investors are focusing on employment data to be released this week. The U.S. Department of Labor will release the February employment report on March 7. Nonfarm payrolls are expected to have increased by 156,000 last month, surpassing January's figure of 143,000. Two days earlier, on March 5, ADP, a private U.S. labor market research firm, will release its February nonfarm employment report. With the Federal Reserve (Fed) repeatedly confirming a cautious rate cut stance, labor market conditions, along with inflation, remain key economic indicators monitored by monetary authorities. The Fed's Beige Book, a report on economic conditions, will also be released on the same day.

U.S. Treasury yields are weak amid concerns about economic downturn. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 7 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.15%, while the 2-year Treasury yield, sensitive to monetary policy, rose 4 basis points to 3.94%.

By sector, stocks from technology to small caps all declined. AI leader Nvidia plunged 8.69%. Super Micro Computer dropped 13%. U.S. automakers General Motors (GM) and Ford, which have production bases in Mexico, fell 3.56% and 1.68%, respectively. Small caps also fell across the board, with the Russell 2000 index, which focuses on small-cap stocks, down 2.64%.