U.S. Stocks Drop On Trump Tariffs, While European Defense Firms Surge

U.S. stocks closed sharply lower Monday after President Donald Trump imposed fresh sanctions on China and new tariffs on Mexico and Canada.

The White House confirmed that Trump signed an executive order raising tariffs on China to 20%.

Meanwhile, European defense stocks soared as the European Union (EU) ramped up military spending in response to the ongoing Ukraine crisis, Agence France-Presse (AFP) reported.

The White House confirmed that Trump signed an executive order raising tariffs on China to 20%. Shortly after, he reiterated that the planned 25% tariffs on Mexico and Canada would proceed as scheduled.

“The tariffs, you know, they’re all set. They go into effect tomorrow,” Trump said at the White House when asked whether the levies against the two U.S. trading partners would be enforced.

The stock market reacted negatively, with the Dow Jones Industrial Average dropping 1.5%, the S&P 500 falling 1.8%, and the tech-heavy Nasdaq tumbling 2.6%.

The CBOE Volatility Index (VIX), often called Wall Street’s “fear gauge,” surged to its highest level since December.

In contrast, European defense stocks saw significant gains. BAE Systems surged 14%, pushing London’s FTSE 100 index to a record high. French defense contractor Thales climbed 16%, while German firm Rheinmetall gained 15%.

“Europe is rallying around Ukraine, and it’s hard to see defense stocks not enjoying years of orders,” noted Neil Wilson, an analyst at TipRanks.

European Commission President Ursula von der Leyen warned on Sunday that "we urgently have to rearm Europe," as European leaders convened in London for crisis talks over Ukraine.