The U.S. stock market took a steep nosedive on Monday following the unexpected announcement by President Donald Trump that tariffs on Canada and Mexico would be implemented by the end of the day. This move effectively ended widespread hopes for an alternative approach that would mitigate disruptions in global trade.

By late afternoon, the S&P 500 had fallen by 2%, teetering towards its most significant loss in a single day since December. Initially stable, the market's mood swiftly altered when Trump confirmed the tariffs; the decision came after negotiations failed to progress towards alternatives to the initially delayed 25% tariffs.

The Dow Jones Industrial Average was down by 735 points, equivalent to a 1.7% drop, while the tech-heavy Nasdaq composite saw a sharper decline of 2.6%.

The sudden downturn in the stock market reflects a tumultuous period for Wall Street, which had previously celebrated a slew of robust earnings reports from major U.S. companies, leading the S&P 500 to a record high. However, recent economic indicators have revealed underlying weaknesses, as shown by increasing pessimism among U.S. households toward inflation, exacerbated by the threat of tariffs.

A concerning report on U.S. manufacturing contributed to Monday’s sell-off. Although the report indicated overall growth, it failed to meet economists' expectations, citing declines in new orders while prices surged. Timothy Fiore, chair of the Institute for Supply Management's manufacturing business survey committee, noted that manufacturers faced operational challenges due to the administration’s tariff policies.

Wall Street had largely anticipated that President Trump might use tariff threats as a negotiating tactic, hoping he would eventually impose less damaging measures. These hopes have now been dashed, stirring fears of further economic repercussions.

The pain was felt across several high-profile stocks, with companies like Nvidia seeing significant downturns, shedding 9.4% of its value, and Tesla also slipping by 4.3%. Similarly, grocery giant Kroger suffered a 2.9% dip following the abrupt resignation of its CEO Rodney McMullen amid an investigation into his conduct.

Interestingly, even companies tied to the burgeoning cryptocurrency sector, which initially surged after Trump announced a new crypto strategy, were not immune. MicroStrategy dropped by 3.1%, while Coinbase plummeted by 5%.

International markets displayed mixed reactions to the news. In China, manufacturers hustled to fulfill orders as traders aimed to beat the impending higher U.S. tariffs. Additionally, Beijing mulled retaliatory strategies, whispering ominously across global trade dialogues.

Contrarily, European and Japanese markets demonstrated resilience, lifted by an easing inflation report in Europe and positive economic signals from Tokyo. Germany's DAX surged by 2.6%, and France's CAC 40 rose by 1.1%, benefiting from expected central bank policy adjustments in light of softer inflation consequences.

In the bond market, there was a notable decrease in the 10-year Treasury yield to 4.16%, from 4.24% before the manufacturing report. While declines in bond yields typically buoy stock prices by lowering borrowing costs, the current drop reflects broader concerns over potential economic slowdowns, according to insights from Morgan Stanley strategists led by Michael Wilson.

As Wall Street navigates the ramifications of this new tariff policy, investors remain wary, eyeing future trade developments and their implications for the U.S. and global economies.