US stock markets have tumbled over concerns that President Donald Trump's tariffs on Canada, Mexico and China will lead to a wider trade war and hurt the economy. The S&P 500 index, which tracks 500 of the biggest companies in the US, fell for a second day, ending at its lowest level since November when Trump won the election. The president has followed through on a threat to impose 25% tariffs on imports from Canada and Mexico, and a 20% levy on China. The move drew swift retaliation, including from Canada, where Prime Minister Justin Trudeau warned Trump his decision to target the US neighbour and close trade partner was a "very dumb thing to do". Trump fired back, writing on social media: "Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!" US Commerce Secretary Howard Lutnick suggested that Trump could be ready to do a deal with Canada and Mexico. "I think he's going to work something out with them," he told Fox News. Saying it would not be a "pause", he added: "I think he's going to figure out, 'You do more and I'll meet you in the middle some way', and we're going to probably be announcing that tomorrow." It is not clear if Trump will announce a new deal but markets will be closely watching the president's address to Congress on Tuesday. Goods worth several billions of dollars cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated. Stock markets in the US and globally have fallen since Trump announced on Monday that the tariffs would go ahead. Canada and China have already announced retaliatory import taxes on US goods. Mexico's President Claudia Sheinbaum said the country would announce a response on Sunday that would include "tariff and non-tariff measures". The Dow Jones Industrial Average dropped 1.5%, while the Nasdaq, where many technology companies' shares are listed, fell 0.35%. The S&P 500 closed 1.2% lower. American retailers and carmakers were among the hardest hit, with electronics chain Best Buy's share price closing more than 13% lower. The company had warned earlier on Tuesday that the tariffs would lead to higher prices for its shoppers. "The giant wildcard obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year," said Best Buy's chief financial officer Matt Bilunas. Trump said he was imposing the tariffs on Canada, Mexico and China in response to what he said was the unacceptable flow of illegal drugs and illegal immigrants into the US. Trudeau called that justification "completely bogus" and warned that Canada's retaliatory measures would hurt. He said Canada would first hit $30bn worth of products, and target the remaining $125bn over 21 days. Any fresh duties Canada imposes will be in place "until the US trade action is withdrawn", he said. "Canadians are reasonable and we are polite, but we will not back down from a fight, not when our country and the wellbeing of every one in it is at stake," he said. Addressing Trump directly, he added: "Donald, you're a very smart guy. But this is a very dumb thing to do." China also swiftly announced its own counter-measures, which include 10-15% tariffs on some US agricultural goods including wheat, corn, beef and soybeans. China is the US's biggest buyer of these goods. "If the United States... persists in waging a tariff war, a trade war, or any other kind of war, the Chinese side will fight them to the bitter end," foreign ministry spokesman Lin Jian said. Trump said he would respond to retaliation with a plan, due in April, for "reciprocal" tariffs. These would be tailor-made to each country and take into account areas such as the trade balance with the US and other taxes, such as VAT. Trump has also threatened to impose 25% tariffs on the EU, recently claiming that the bloc had been "formed to screw the United States". Europe has pledged to hit back, but no tariffs have been implemented yet.
