The Nasdaq Composite entered a correction phase following U.S. President Donald Trump’s decision to extend the tariff pause to include goods from Canada and Mexico, provided they comply with the terms of the United States-Mexico-Canada Agreement. Unlike the previous tariff pause that boosted stocks, this move led to a decline in major U.S. benchmarks, with the Nasdaq Composite particularly affected, erasing the gains it had seen post-election.

Investors reacted negatively as the Trump administration appeared to be reinforcing its tariff stance despite the potential negative impacts. The administration’s dismissal of market concerns, as Trump stated he was not monitoring market movements, disappointed investors who had relied on the so-called “Trump put” to prevent significant stock market declines. Meanwhile, U.S. Treasury Secretary Scott Bessent downplayed the significance of “cheap goods” in the American dream, emphasizing the administration’s tariff strategy as a means of revenue generation and industry protection.

The tariff pause on goods from Canada and Mexico, which will be in effect until April 2, aims to exclude a significant portion of imports from these countries from the 25% tariffs imposed by the U.S. government. However, the market response was not favorable, with U.S. stocks experiencing a significant drop as investors grew weary of the ongoing tariff fluctuations. The S&P 500 and Dow Jones Industrial Average both fell, while the Nasdaq Composite’s decline pushed it into correction territory, wiping out its post-election gains.

Amidst these developments, U.S. employers announced a substantial number of layoffs in February, the highest monthly count since the Covid pandemic era, with notable job cuts attributed to efforts led by Elon Musk, supported by Trump, to reduce the federal workforce. This added to the market unease caused by the tariff uncertainties, leading to a sell-off in U.S. markets.

Furthermore, the European Central Bank’s decision to cut interest rates contributed to global market volatility, with government borrowing costs increasing worldwide. Yields on German government bonds surged, reflecting market reactions to both Trump’s tariff policies and a perceived shift in German political dynamics. This shift triggered a risk-on sentiment among investors, impacting global bond markets.

In summary, the Nasdaq’s correction, influenced by Trump’s tariff decisions, has underscored the market’s sensitivity to trade policies and geopolitical developments. The interconnectedness of global markets, as evidenced by reactions to U.S. tariff changes and European monetary policy, highlights the importance of understanding the broader economic landscape for investors worldwide.