The trade war is here

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President Trump on Saturday issued promised tariffs on three of the US’s biggest trading partners, sending global markets into a tailspin as investors tried to position themselves for a trade war.

The higher fees initially were supposed to take effect just after midnight, but the White House said Monday it reached a deal with Mexico to delay the tariffs by one month. Trump also said he has spoken with Canadian PM Justin Trudeau and will do so again at 3 pm ET.

Volatility is the name of the game today — and probably will be all week — as traders struggle to keep up with every new headline.

I won’t try to recap every market move we’ve seen since Saturday, but here are some top-level highlights:

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Stock futures, predictably, plunged over the weekend. The S&P 500 and Nasdaq Composite slid sharply at the open Monday, but both indexes pared some losses after news broke that the 25% tariff on Mexico will be delayed.
Bitcoin dipped to a 30-day low of just under $93,000 late Sunday but similarly rebounded. The largest crypto was trading around $100,000 at 2 pm ET.
The Mexican peso gained as much as 1% Monday, erasing its losses since Friday. The Canadian dollar also moved into green against the US dollar this morning but was not back to pre-weekend levels.

While Trump was able to reach a deal with Mexico to delay the tariffs for a month, the levies on Canada and China are still set to begin Tuesday, at least at time of writing.

The tariffs, in theory, should come as no surprise. Trump said on the campaign trail for months that he would hit Mexico and Canada with 25% tariffs and China with 10%.

But then his flurry of first-day actions came, and tariffs were nowhere to be found. Plus, reports that his team would take a gradual approach (like they did back in 2018), circulated. (I’ll be the first to admit, I was definitely in the “gradual” camp myself.)

But the market was “completely under-pricing the risks,” Deutsche Bank analyst Jim Reid wrote in a note today, hence the “severe shock” we are now experiencing.

Markets, until now, seem to have been viewing tariffs as more of a negotiation strategy than a reality. And a deal with Canada is still possible, but “there is still asymmetry to the downside in case of disappointment on the progress of these talks,” Aurelie Barthere, principal research analyst at Nansen, said.

Meanwhile, the latest ISM manufacturing index was released today, and it shows there was growth last month for the first time in more than two years. An argument could be made that the boost was due to pre-emptive tariff stockpiling rather than fundamental expansion, but only time will tell.

The Institute of Supply Management, which conducts the survey, says Trump’s tariffs pose a threat to manufacturing recovery.

“I don’t think tariffs are going to help us,” Survey Chair Timothy Fiore said. “This is not a good thing for business.”

Still, Fiore added, the timeline of tariffs (he said even before the Mexico deal was announced that he was skeptical they’ll be in place on Tuesday) remains to be seen.

The general fear, though, is that manufacturers will have to pay higher prices for raw materials while their own exports could also face higher fees from retaliation tariffs.

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