Nvidia stock fell as much as 5% on Monday following U.S. President Donald Trump's announcement of new tariffs on Mexico, Canada, and China, fueling trade war concerns across global markets. European shares, including the pan-European STOXX 600, dropped 1.3%, while the tech-heavy Nasdaq slid over 2% in early trading, highlighting investor unease about escalating international trade tensions.

The White House revealed on Saturday that tariffs on Chinese imports would increase by 10%, while Mexican and most Canadian goods would face a 25% duty. These measures surprised many analysts who believed the risk had been underpriced. In three executive orders, the administration imposed the new levies set to begin on Tuesday, prompting retaliatory tariffs from Mexico and Canada.

Nvidia's decline extended losses from last week. Its stock was already under pressure after reports surfaced that administration officials were considering tighter export rules for Nvidia's H20 chips, designed specifically for the Chinese market. According to Bloomberg, the potential expansion of restrictions comes on the heels of Chinese AI firm DeepSeek's latest model launch, which some analysts say has cast doubt on massive AI infrastructure spending.

The tech sector has taken a beating as a result. Nvidia plunged 17% in a single day last week, erasing $589 billion in market capitalization. Competitors also felt the sting on Monday, with Advanced Micro Devices and Qualcomm losing around 2%, and Micron and Broadcom slipping roughly 3%.

"While semiconductors aren't directly affected by the new tariffs, Bernstein analyst Stacy Rasgon wrote in a Monday research note that the duties would affect imports of data processing equipment, such as servers using AI chips. Higher prices of those products could reduce demand and have an indirect effect on chip sales." Rasgon referenced U.S. Department of Commerce figures showing that Americans imported $39 billion worth of data processing equipment from China in 2023, plus another $28 billion from Mexico.

Foxconn, which is constructing the world's largest server assembly factory in Mexico to support Nvidia's Blackwell AI chips, may also be impacted. This situation adds to a broader market selloff that has particularly hit manufacturers and technology firms with supply chains reliant on cross-border flows.

European markets joined the global downturn. Automakers, grouped under the region's .SXAP index, dropped over 3% due to vulnerability to further trade duties. "We'll see how things work out. It might happen with them, but it will definitely happen with the European Union, I can tell you that," said Trump, hinting at more potential tariffs beyond North American partners.

Investors also watched currency fluctuations. The euro slid 0.9%, while the British pound fell 0.4% after the President called Britain "out of line" on trade. The Mexican peso tumbled more than 2% to reach its weakest level in almost three years against the U.S. dollar. Japanese equities took a hit, with the Nikkei closing down nearly 3%, and Australia's benchmark index shed 1.8%.

"Trump's move was the first strike in what could usher in a destructive global trade war and drive a surge in U.S. inflation that would 'come even faster and be larger than we initially expected,'" said Paul Ashworth of Capital Economics. Olivier D'Assier, head of applied research for Asia Pacific at Simcorp, noted: "People thought, okay, there's a pro-business president, there's a pro-business Congress. What could go wrong, right? And I think it's just a little bit of a shock that he's trying to do so many things at once."

  • Key Figures from Monday's Market Reaction:
    • STOXX 600 index fell 1.3%.
    • Nasdaq futures slid 1.6%.
    • Russell 2000 futures declined 2.23%.
    • U.S. two-year Treasury yields rose as much as 3.6 basis points to 4.28%.
    • Bitcoin dropped to $91,439.89, and ether sank 20%.
    • U.S. crude oil prices climbed 2.62% to $74.42 a barrel.

Nvidia CEO Jensen Huang met with Trump at the White House last Friday, according to a source who told Reuters that they discussed DeepSeek. Meanwhile, traders remain on edge as Barclays strategists previously estimated tariffs could create a 2.8% drag on S&P 500 company earnings, magnifying broader market fears.