Stocks have rallied since the election, but a blasé Wall Street finally got its first dose of Trump and his trade policies as the President’s long-awaited and feared tariffs took effect to start the week — with a few surprises.

A 25% tariff on Canadian and Mexican imports, plus a 10% additional tariff on Chinese goods set to take effect on Tuesday, had a last-minute change as Mexico, Canada, and the US mutually agreed to punt their respective tariffs as part of a last-minute agreement, defusing some of the market’s angst.

The day of reckoning: With the blow of the tariffs lessened by the surprise switch-up, the S&P 500 and Nasdaq-100 were able to claw back from a 1%+ intraday decline. However, Wall Street remained weary — even in spite of good news. For the last five weeks, hedge funds have sold US equities amid worries about the tariffs and their impact at home and abroad — leaving retail investors as some of the foremost “dip-buyers.” Whether it will pay off could have a lot to do with whether the tariffs last.

• Last week, JPMorgan analysts warned that the tariffs were “tilting into a business-unfriendly stance,” which could shift business sentiment and jeopardize the economy.
• Meanwhile, Morgan Stanley analysts forecast US inflation to rise in the coming months if tariffs aren’t a temporary blip — and they weren’t alone, as many analysts expect the same.

Game Trade Theory

With Mexico and Canada in the clear for now, auto companies like StellantisSTLA

and General MotorsGM

, alcohol giant Constellation BrandsSTZ

, and restaurant chain ChipotleCMG

were able to stave off the threat of larger stock losses created by the tariffs. But consequences still await.

• For Americans, tariffs on Canadian and Mexican goods could exacerbate the housing crisis, impacting agriculture and domestic auto production — and Chinese tariffs could create headaches for electronics prices and popular discount retailers like TemuPDD
  .
• However, Trump is estimating that the impact on China and Canada will force a deal — the Yuan just hit a record low in offshore trading, while the Canadian dollar and Mexican peso extended losses.

Retaliation station: At least until everything is settled, all three of America’s major trade partners are considering options for maximum damage. Both have reportedly considered retaliatory tariffs on American goods — which could go into effect if they don’t come to an agreement with Trump. And in Canada, Trump-flavored conservatives have floated tariffs targeting America’s red states while imposing bans on goods such as American liquor brands, which could potentially harm an already-hampered US spirits business. It might be the start of a long series of blows.