NEW YORK - Global stock markets extended losses on Tuesday as US President Donald Trump waffled on the size of tariffs he will levy on Canadian steel, aggravating concerns his trade policies could push the United States toward recession.
In New York, the Dow index of blue-chip stocks closed down 1.1% while the broad-based S&P 500 shed 0.8%.
The tech-heavy Nasdaq dipped 0.2%, though Tesla and Amazon staged rebounds a day after the index closed 4% lower in its worst session since 2022.
Europe's main indices ended the day in the red, as did most in Asia.
"Markets are jittery and volatility seems like the only certainty while the White House pushes hard to usher in a new era, seemingly happy for stock markets to be collateral damage," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Traders had initially welcomed Trump's election win in late 2024, optimistic that his promised tax cuts and deregulation would boost the world's biggest economy and help equities push to further record highs.
But there is growing concern that tariffs against key trading partners will reignite inflation, forcing the Federal Reserve to again start raising interest rates and triggering a recession.
Since taking office in January, Trump has announced sweeping tariffs on imports from Canada, Mexico and China, though he had allowed a partial and temporary rollback for the two US neighbours.
Tariffs on steel and aluminum are due to take effect on Wednesday, affecting a wide range of producers from Brazil to South Korea and the European Union.
Trump announced earlier in the day that he was doubling the tariffs on Canadian steel and aluminum to 50%, in response to the Canadian province of Ontario imposing of a 25% surcharge on electricity exports to three US states.
But by the afternoon, the plan had been binned, with Canada facing only a 25% tariff after midnight as originally planned.
Analysts said investors were also concerned that Trump appears more willing to see stock markets fall than during his first term in office, after he said the economy was facing "a period of transition" and refused to rule out the risk of recession.
"The problem for markets is that this is a man-made crisis," said Kathleen Brooks, research director at the trading platform XTB.
Trump's "'bull in a china shop' approach to economic policy has spooked investors. The question is, will it continue to spook consumers, the life blood of the US economy," she said.
Oil sees slight rebound
Investors will also keep a close eye on US consumer inflation data on Wednesday, as it could influence the Fed's next move.
Oil prices began a slight rebound after dropping more than 1% Monday on worries about demand as US recession speculation builds.
However, both main contracts remain down around 8% for the year so far.
In company news, shares in Volkswagen dipped 0.1% as the German auto giant geared up for another tricky year after posting a sharp loss in annual profits for 2024.
Tesla was up 3.8% and Amazon gained 1.1% after plunging the previous day, but tech heavyweight Apple extended its losses as it fell 2.9%.
Key figures around 2100 GMT
New York - Dow: DOWN 1.1% at 41,433.48 points (close)
New York - S&P 500: DOWN 0.8% at 5,572.07 (close)
New York - Nasdaq: DOWN 0.2% at 17,436.10 (close)
London - FTSE 100: DOWN 1.2% at 8,495.99 (close)
Paris - CAC 40: DOWN 1.3% at 7,941.91 (close)
Frankfurt - DAX: DOWN 1.3% at 22,328.77 (close)
Tokyo - Nikkei 225: DOWN 0.6% at 36,793.11 (close)
Hong Kong - Hang Seng Index: FLAT at 23,782.14 (close)
Shanghai - Composite: UP 0.4% at 3,379.83 (close)
Euro/dollar: UP at $1.0915 from $1.0836 on Monday
Pound/dollar: UP at $1.2954 from $1.2878
Dollar/yen: UP at 147.70 yen from 147.26 yen
Euro/pound: UP at 84.26 pence from 84.13 pence
West Texas Intermediate: UP 0.3% at $66.25 per barrel
Brent North Sea Crude: UP 0.4% at $69.56 per barrel