U.S. Stocks Fall, Dollar Rises as Trump Slaps Tariffs on Canada, Mexico, and China

The S&P 500—tracked by the SPDR S&P 500 ETF Trust SPY—fell 1%, sliding from 6,120 points at midday to 6,045 points by 2:45 p.m. ET.

U.S. stock indices reversed earlier gains and fell sharply on Friday after the White House confirmed that new tariffs on imports from Canada, Mexico, and China will take effect on Saturday, escalating trade tensions with the country's three largest suppliers.

The S&P 500—tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY)—fell 1%, sliding from 6,120 points at midday to 6,045 points by 2:45 p.m. ET.

The Dow Jones Industrial Average dropped 0.8% to 44,530 points, while the Nasdaq 100—tracked by the Invesco QQQ Trust, Series 1 (NASDAQ:QQQ)—fell 1.5%, reversing an earlier 1.3% gain.

Sector-wise, the Energy Select Sector SPDR Fund (NYSE:XLE) deepened its losses, sliding 2.9%. Meanwhile, the Communication Services Select Sector SPDR Fund (NYSE:XLC) was the only sector still in positive territory, up 0.3%, though it had pared earlier gains.

The Trump administration is imposing a 25% tariff on goods from Canada and Mexico, along with a 10% duty on Chinese imports. White House Press Secretary Karoline Leavitt stated that the measure responds to these nations’ alleged role in allowing illegal fentanyl to enter the U.S.

A Goldman Sachs research note published Friday estimated that GDP in Canada and Mexico could decline by 1% to 4%, with consumer prices rising up to 2% due to increased import costs.

For the U.S., the new tariffs would raise the overall tariff rate by 7.3 percentage points, resulting in a 0.7% increase in core personal consumption expenditures prices—the Federal Reserve's preferred inflation gauge—and a 0.4% drag on U.S. GDP growth.

Dollar Reigns Supreme, Canadian Dollar Nears 9-Year Lows

In currency markets, the U.S. dollar strengthened against all major counterparts, particularly against those most affected by the tariff announcement.

The greenback surged past 1.4520 against the Canadian dollar, on track to close the session at its highest level since January 2016.

The dollar erased earlier losses against the Mexican peso and gained 0.3% against the Chinese yuan.

A broader measure of dollar strength, as broadly followed by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), was up 0.3%.

Bond Yields Surge, Gold Retreats, Bitcoin Slumps

Treasury yields spiked, reflecting investor concerns over the inflationary impact of tariffs. Both 10-year Treasury yields and 30-year yields were up 5 basis points to 4.57% and 4.81%, respectively.

As a reaction, the iShares 20+ Year Treasury Bond ETF (NYSE:TLT) fell 0.7%.

Gold pared earlier gains amid a stronger dollar and rising yields, with spot gold prices down 0.3% to $1,962.

Bitcoin (CRYPTO: BTC) bore the brunt of the risk-off move, tumbling over 3% from $105,000 to $102,000.

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