Stocks dropped Monday on fears of a possible recession and confusion over President Trump’s trade plans.
The Dow Jones Industrial Average was down more than 500 points, or 1.3%, during midday trading, and the Nasdaq and S&P 500 were down as a sell-off continued into another week.
Traders are trying to digest upheaval in Washington, where Mr. Trump slapped 25% tariffs on Canada and Mexico only to exempt automakers and then a suite of goods under the U.S.-Mexico-Canada free-trade agreement he struck in his first term.
The president said tariffs could come back in April as part of a broader portfolio of levies against many nations.
Mr. Trump, speaking to Fox News on Sunday, also did not rule out the possibility of a recession as he deploys his aggressive trade agenda.
“I hate to predict things like that. There is a period of transition because what we’re doing is very big,” he told “Sunday Morning Futures” host Maria Bartiromo.
Commerce Secretary Howard Lutnick, meanwhile, shot down the idea that Americans should brace for a recession.
“There’s going to be no recession in America,” Mr. Lutnick said Sunday on NBC News’ “Meet the Press.”
Mr. Trump is sticking by his threat to impose sweeping tariffs, which are a tax or duty paid by importers on the goods they bring in from foreign markets.
Mr. Trump says tariffs are a great way to force companies to return to America or keep their operations in the U.S., employ American workers and create revenue to fund domestic programs.
But tariffs can also result in higher prices for consumers. Foreign countries don’t pay the tariffs directly to the U.S. Treasury.
In many cases, U.S. companies will pay the levies, and they might pass on at least some of the cost to consumers through higher prices.
A key trade group said container-port volume is increasing as retailers are scrambling to get ahead of tariffs by ordering extra products.
“Retailers are continuing to bring as much merchandise into the country ahead of rising tariffs as possible,” said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation. “Retailers have been working on supply chain diversification, but that doesn’t happen overnight. In the meantime, tariffs are taxes on imports ultimately paid by consumers, not foreign countries, and American families will pay more as long as they are in place.”
Kevin Hassett, director of the White House National Economic Council, said people should be optimistic about the long term as Mr. Trump tries to shake off the “Biden economy” and pass tax cuts and reduce regulations.
He said the uncertainty that people are seeing now should wane by April.
“The second quarter’s going to take off after everyone sees the reality of the tax cuts,” Mr. Hassett told CNBC.
Mr. Trump’s trade threats and new tariffs on China are prompting retaliation.
China on Monday imposed retaliatory tariffs against U.S. farm products such as wheat, corn and poultry.
Foreign ministry spokeswoman Mao Ning scolded the U.S. during her regular press briefing.
“The U.S. has benefited abundantly from trade with China. The high-quality products at reduced cost exported by China to the U.S. have essentially raised the purchasing power of U.S. consumers, and created a huge amount of jobs in the U.S., particularly in sectors such as transport, wholesale, retail and e-commerce.
Trade wars, Ms. Mao said, “invariably start by hurting others before coming back to hurt the one who launched it.”
“It’s time for the U.S. to learn its lesson and end this wrong practice,” she said.
• Seth McLaughlin contributed to this report.
