QQQ, SPY Slump After Trump Tariffs Dent Risk Appetite: Retail Turns Downbeat

JPMorgan said a sustained 25% tariff will be severe enough to throw Mexico and Canada into recessions

The Invesco QQQ Trust (QQQ) and SPDR S&P 500 ETF (SPY) were sharply lower in Monday’s pre-market trading as investors considered the potential impact of President Donald Trump’s tariff measures announced Saturday.

A White House statement said Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. The tariff on energy resources from Canada would be lower at 10%.

A Stocktwits poll that collected responses from over 11,600 retail investors on the platform found that over half of the respondents think implementing the tariffs would start a downturn.

On Stocktwits, sentiment toward QQQ exchange-traded fund (ETF) turned ‘extremely bearish’ (23/100) from the ‘bearish’ mood that prevailed a day ago. Sentiment toward SPY ETF stayed ‘extremely bearish’ (17/100). Message volume on both streams remained at ‘high’ levels.

SPY and QQQ were among the tickers with the highest activity on early Monday, and SPY was among the top five trending stocks.

A retail watcher said, the QQQ ETF will likely rest the $500 range and be very volatile this week.

Another cautioned regarding buying the dip, citing severe consequences of the Trump tariffs on the global economy.

In premarket trading, QQQ fell 1.51% to $514.40 and SPY declined by a more modest 1.32% to $593.85. 

The CBOE Volatility Index, commonly called VIX, spiked 22% to $20.05, the highest level since late January when the DeepSeek threat led to a slump in tech stocks. VIX was among top ten trending symbols on Stocktwits early Monday.

Investors will likely look ahead to views from experts and analysts regarding the potential impact of the newly announced tariffs on different sectors of the economy. 

Traders may also focus on the Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) for January, due at 10 a.m. ET. Economists expect the PMI to remain nearly unchanged at 49.3. S&P Global’s final manufacturing PMI, scheduled for 9:45 a.m. ET, is expected to improve to 50.1 in January from 49.4 in December, signaling an expansion.

Wall Street firms see Trump’s tariffs having severe consequences on Canada and Mexico. JPMorgan said a sustained 25% tariff will be severe enough to throw Mexico and Canada into recessions, according to a post shared on X. Morgan Stanly opined that recession becomes a base-case scenario for the Mexican economy following Trump’s tariff increases.

Economist and former Treasury Secretary Larry Summers warned that the tariffs will give an upper hand to China and potential loss of competitiveness for the U.S. manufacturing industry.

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