U.S. stocks fell in a recent trading session following a surprising announcement from President Donald Trump, who threatened to impose a 35% tariff on Canadian imports — marking a significant escalation in the ongoing trade dispute.
The Dow Jones Industrial Average declined by 279 points (0.63%), while the S&P 500 slipped 0.33%, and the Nasdaq Composite eased 0.22%. Markets had already started to slide Thursday night after Trump’s announcement, with the proposed tariffs set to begin August 1. This downturn ended a streak of weekly gains: the S&P 500 posted its first weekly loss in three weeks, while the Dow and Nasdaq also saw their three-week winning runs come to an end.
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Despite Friday’s dip, global markets remained relatively unfazed throughout the week, even as Trump raised trade tensions with a separate 50% tariff on Brazilian goods announced just a day earlier. Both the S&P 500 and Nasdaq managed to close at all-time highs on Thursday, suggesting that investors have grown less reactive to the president’s tariff threats.
In an interview with NBC News on Thursday, Trump hinted that further tariff increases on other trade partners could be on the table, using the strong stock market performance to justify his trade stance. “I think the tariffs have been very well-received,” Trump said. “The stock market hit a new high today.”
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Some market analysts believe this investor calm could reflect misplaced confidence. Steve Sosnick, chief strategist at Interactive Brokers, noted that many traders are banking on what’s become known as the “TACO trade” — shorthand for the belief that “Trump Always Chickens Out.” According to Sosnick, traders are operating under the assumption that tariffs are still negotiable and that deadlines can be shifted or deals struck at the last minute.
“There’s been a lot of money made on the idea that tariffs are flexible,” he said. “Why change that strategy now?”
While some view Trump’s latest tariff announcement as a hardline negotiating tactic — given the deadline is still weeks away — there’s no certainty he will retreat. One particularly concerning threat is a potential 50% tariff on copper, which could have wide-ranging economic consequences.
“We might be heading toward a scenario where overly optimistic investors get blindsided by changes to corporate earnings projections or the full rollout of tariffs,” Sosnick warned.
JPMorgan Chase CEO Jamie Dimon also sounded a note of caution during an event in Dublin on Thursday, saying, “I think markets are showing a bit of complacency and are becoming desensitized.”
Although Trump’s tariff announcement on Canada weighed on stocks Friday, the sell-off was relatively muted compared to the intense market volatility seen during earlier trade skirmishes in March and April. It remains uncertain whether the new tariffs will apply across the board or only affect items already facing a 25% duty. According to a U.S. administration official, products currently exempt under the U.S.-Mexico-Canada Agreement (USMCA) would likely remain exempt.
In a research note, Bank of America analysts noted the market’s muted reaction. “The general consensus is that things will eventually stabilize, a few deals will be reached, and this round of negotiations can be safely ignored,” they wrote.
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