Stock market today: Dow, S&P 500, Nasdaq sink after Trump hits Canada, Mexico, China with tariffs

The US dollar (DX=F) is surging as investors weigh the risks of a trade war after President Trump's tariff salvo.

On Monday morning, the greenback was trading near its highest level in almost two years against a basket of leading currencies, with the dollar index (DX-Y.NYB) up nearly 1%.

Canada and Mexico's currencies were among the hardest hit after Trump said he would impose 25% tariffs on both starting Tuesday. The Canadian dollar (CADUSD=X) dropped to its lowest against the US dollar since 2003, while the Mexican peso (MXNUSD=X) sank to an almost three-year low.

The euro (EURUSD=X) also lost some ground on the heels of Trump's warning to the EU that tariffs will "definitely happen," though he offered no other details.

The gains for the dollar fed into worries that more expensive imports could fuel inflation, which would curb the Federal Reserve's scope to lower interest rates.

Shares of big US automakers Ford (F) and General Motors (GM) sank in Monday's premarket trading, mirroring a drop in European peers' stocks.

GM fell 6.5%, while Ford moved about 4% lower. Stellantis (STLA), the last of the traditional Big Three, saw its US-listed stock retreated roughly 6%. Electric vehicle maker Tesla (TSLA) shed about 2%.

Carmakers are among the industries likely to take the biggest hit from the tariffs on Mexico and Canada, given they are heavily reliant on cross-border trade. Between 25% and 40% of the vehicles the Big Three sell in the US are imported from one of those two countries, per a Financial Times report.

Ford CEO Jim Farley told Yahoo Finance last week that he expected Trump's tariff positioning to play out beyond February, but signaled the company could withstand them better than its rivals as it has the largest US manufacturing footprint. Read more here.

US stocks face a 5% drop this year amid a hit to earnings if the Trump administration lets its hefty tariffs on Canada, Mexico, and China run for a while, Goldman Sachs has warned.

Goldman strategist David Kostin said sustained tariffs could reduce his S&P 500 earnings growth forecast by about 2% to 3%.

The benchmark could come under pressure from a hit to earnings and equity valuations, driving down the fair value of the S&P 500, he told clients in a note.

Kostin joins a panoply of Wall Street analysts cautioning about the impact of the tariffs on the economy and stock market. JPMorgan's metals and mining team said it sees the biggest financial risks to Alcoa (AA), GrafTech International (EAF), and Cleveland Cliffs (CLF).

Read more here in a report by Yahoo Finance's Brian Sozzi.

Hong Kong-listed shares in Chinese companies outdid Asian peers on Monday, holding up in the face of looming tariffs thanks to strength in the tech sector.

The Hang Seng China Enterprises Index (^HSCE) closed broadly flat, compared with falls of 2.6% for both the Nikkei 225 (^N225) in Tokyo and South Korea’s KOSPI (^KS200). Markets in Shanghai are shuttered for the Lunar New Year holiday and will reopen on Wednesday.

A rally in Alibaba (9988.HK, BABA) and SMIC (0981.HK) shares provided a tailwind, coming as DeepSeek-fed hopes for Chinese AI fed through after a holiday shutdown in trading.

China is keen to kick off trade talks with the US, and it is laying the groundwork for a push to head off bigger tariff hikes and tech curbs, the Wall Street Journal reported.

European stocks fell sharply early on Monday amid fears the region is next in line for tariff hikes by the Trump administration.

The Stoxx 600 (^STOXX), the pan-European benchmark, slumped 1.3% as investors weighed President Donald Trump's comment that tariffs would "definitely happen" for EU imports to the US. Germany's DAX (^GDAXI) fell 1.6%, while the CAC 40 (^FCHI) in Paris dropped 1.5%.

Shares in carmakers, which are more sensitive to tariffs, led the sell-off, with Stellantis (STLA) down 6%.

Asian markets, the first to open since President Donald Trump's tariff announcement, have seen big slides as investors react to a trade war poised to erupt.

Major Asian indexes all saw heavy losses throughout the day's trade as The MSCI Asia Pacific Index fell more than 2%, Hong Kong's Hang Seng Index was down 0.7%, Japan's Nikkei 225 was 2.8% lower, South Korea's Kospi tumbled 3%, and Australia's ASX 200 fell 1.9%.

Markets in mainland China have remained closed for the Lunar New Year holiday, but with China being singled out for a 10% tariff on exports, we can expect to see a similar downturn.

Currently, Beijing has not announced a plan of economic retaliation. Instead, there have been calls from the Chinese Ministry of Commerce for the US to "meet China halfway" in negotiations around the upcoming implementation of duties.

Some of the biggest sectors to see downturns from the tariffs include automakers and Chinese e-commerce platforms.

Automakers saw shares drop of at least 5% in household names such as Toyota (TM), Honda (HMC), and Nissan (7201.T)

Chinese e-commerce platforms are under fire as the "de minimis" trade exemption for small package will be expiring, leading to impacts on costs for clothing, accessories, home goods and electronics.

Asia’s biggest chip exporters, including Taiwan Semiconductor Manufacturing Co (TSM) and Samsung Electronics Co (005930.KS), fell by 1% as Trump said he would tax the essential components of electronics.

Oil jumped Sunday in response to sweeping tariffs placed by President Donald Trump on a range of imports — including crude from Canada and Mexico. Consumers can expect a rise in energy prices over the coming weeks in response to the rise in crude.

West Texas Intermediate (CL=F) futures hit as high as $75.18 a barrel, over a 3% rise, while Brent crude (BZ=F) topped out around $76 with a 1% bump.

Crude oil is one of the commodities subject to a reduced duty of 10% as part of an understanding that Canada and the US are heavily dependent on each other to fulfill their energy needs. The US imports nearly 4 million barrels a day from Canada. The tariff announcement led to gas futures pumping upwards by just shy of 3%.

Trump has flagged even wider tariffs in the coming months, including against the European Union and covering an ever-increasing variety of goods and industries. Prices can be expected to shift roughly as the president warned "THERE WILL BE PAIN" in a post on Truth Social late Sunday.