Stocks Rattle, Gold Surges as Trump’s Tariffs Take Effect

Stocks were rocked and safe havens surged after President Trump’s tariffs on Canada and Mexico went into effect overnight. The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) tumbled about 2% each before paring their losses midday.

At its lows, SPY was down 6.7% from its all-time high set on Feb. 19, while QQQ was down 9.8%—putting it just shy of the 10% threshold that many investors consider to be a “correction.”

After delaying tariffs for a month back in February, investors were hopeful that the president would do so again this week. But that didn’t happen, sparking the latest flurry of selling.

Safe-haven surge

While stocks sold off, safe havens like the SPDR Gold Trust (GLD) rallied. GLD rose by as much as 1%, extending its year-to-date gains to more than 11%.

For their part, bonds initially rallied and then sold off as traders weighed the likelihood of Federal Reserve rate cuts driven by an economic slowdown against the risk of tariff-fueled consumer price increases.

The iShares 20+ Year Treasury Bond ETF (TLT) was last trading down by 1.4% after rising 0.2% at its highs.

Probabilities based on the pricing of fed funds futures suggest that the U.S. central bank might cut rates three times this year. That’s an increase from the single cut traders were anticipating just a few weeks ago, before trade war concerns took center stage.

Buyers Step In, but Uncertainty Looms

Stock ETFs began to pare their losses by midday Tuesday as dip buyers looked at the steep drop as a buying opportunity. There’s certainly the potential for a bounce—buying the dip has been a lucrative strategy over the past couple of years.

However, the sheer uncertainty surrounding the Trump administration’s trade policies makes this a treacherous time for investors accustomed to relatively stable market conditions.

Few investors expected Trump to actually go through with the tariffs on Canada and Mexico; their implementation has upended decades of North American trade policy, blindsiding markets and throwing the future of U.S. trade relations into uncharted territory.

Surprising Justification for Tariffs

Many investors have been particularly confounded by the Trump administration’s justifications for the tariffs.

Commerce Secretary Howard Lutnick said that the tariff policies were aimed at curbing drug trafficking. In an interview on CNBC, he said:

“The current tariff policy is a drug-related policy. There are opioids pouring into this country. They’re killing about 75,000 autopsied Americans a year. China makes the opioid products, and then Mexico and Canada feed them into America, and that’s got to end. They’ve done a nice job on the border, but they haven’t stopped the flow of fentanyl.”

The Trump administration hasn’t released any clear guidelines on how Canada and Mexico can respond to the tariffs or what specific actions might lead to their removal. In 2024, the U.S. intercepted 19 kilograms of fentanyl at the northern border, compared with almost 9,600 kilograms at the border with Mexico, according to reporting by The New York Times.

This stark disparity raises questions about the administration’s justification for targeting both countries equally under its trade policies.

Trade Tensions Aren’t Going Away

Even if the tariffs on Canada and Mexico are lifted in the coming months, trade tensions aren’t going away anytime soon. Since taking office, Trump has twice raised tariffs on China by 10%, triggering swift retaliation from Beijing. 

He has also vowed to impose reciprocal tariffs on U.S. trading partners in April, signaling that the trade war could widen beyond North America and China. 

For investors, this means continued volatility and uncertainty. While markets have learned to expect the unexpected from this administration, traders will be closely watching for any signs of de-escalation—or yet another round of tariffs that could rattle the global economy.