US markets slump as Trump aluminium tariffs hit investor confidence

The downturn in US stock markets deepened yesterday following the Trump administration’s announcement of fresh tariffs on Canadian aluminium imports. Equity prices continued their slide, wiping billions from company valuations and raising fears of worsening economic disruption.

America’s leading stock indices suffered across the board. The S&P 500, widely seen as a barometer for the largest US firms, fell by 1 per cent. The Dow Jones Industrial Average shed 1.4 per cent, and the tech-heavy Nasdaq dropped 0.56 per cent, reaching lows not seen since mid-2024. Collectively, these losses have erased substantial gains made in previous months, taking valuations back to pre-election levels.

The volatility index (Vix), often referred to as the market’s ‘fear gauge’, rose sharply by over 4 per cent, reaching a figure of 29.14. Market analysts suggest this reflects mounting uncertainty among investors about the outlook for the US economy.

In unveiling this latest 25 per cent tariff on Canadian aluminium imports, Trump has effectively doubled the total duty on the metal to 50 per cent. The policy is part of broader protectionist measures aimed at boosting domestic industries, though it has prompted backlash over its expected inflationary impact and its potential to weaken consumer spending.

US financial markets have also reflected growing investor concerns about disruptions to the labour market following drastic cuts to the federal workforce under the controversial Department for Government Efficiency (Doge) programme led by Elon Musk. Bradley Saunders from Capital Economics noted deteriorating conditions and highlighted the worsening picture for labour market stability.

The fallout was not confined to the US. Across the Atlantic, European markets faced significant losses. The FTSE 100 dropped 1.2 per cent, while the pan-European Euro Stoxx 600 fell 1.8 per cent. Meanwhile, the pound weakened by 0.3 per cent against the euro, trading at €1.18.

Analysts warn that unless economic conditions improve or policy uncertainty eases, markets may continue to tumble. Amid growing concerns, Trevor Greetham of Royal London remarked that economic data in the near term is unlikely to settle investor nerves.