U.S. stocks suffered sharp losses Monday after President Donald Trump announced new tariffs on several trading partners and Tesla shares plunged on CEO Elon Musk’s political party plans. The Dow Jones Industrial Average dropped 422 points (0.94%), while the S&P 500 and Nasdaq each fell about 0.8%. Markets extended declines after Trump revealed tariffs targeting Japan, South Korea, Malaysia and other nations set to take effect August 1, reigniting trade war concerns just weeks after indexes hit record highs.
Tesla led the selloff, crashing 6.8% to its lowest close in a month after Musk announced formation of the “America Party,” escalating tensions with Trump. The electric vehicle maker’s slump accounted for the S&P 500’s biggest drag. “Markets had assumed peak tariff risk was behind us, so this resurgence is causing skittishness,” said Emily Roland of John Hancock Investments, noting investors may hope the measures get dialed back as in past trade disputes.
The tariff announcements marked a reversal from recent market optimism, coming just days after strong jobs data pushed indexes to new peaks. Trump also threatened 10% duties on countries aligning with BRICS nations’ “anti-American policies,” with final tariff decisions due by July 9. The moves recalled April’s volatility when initial tariff threats briefly pushed Nasdaq into bear market territory before a swift recovery.
Sector performance reflected risk aversion, with consumer discretionary and energy stocks down over 1%, while defensive utilities and consumer staples eked out gains. In a bright spot, WNS Holdings surged 14.3% on Capgemini’s $3.3 billion acquisition offer. Analysts warn markets may face continued turbulence as investors weigh escalating trade tensions against hopes for negotiated pullbacks in the measures.