The FTSE 100 fell back from record highs on Tuesday as 25% tariffs on Canada and Mexico came into force, and Donald Trump announced that military aid for Ukraine would be paused.

• FTSE 100 retreats from record highs
• Canada and Mexico hit by 25% tariffs
• China tariffs doubled to 20%
• Ashtead profit falls

London’s leading index was down 0.4% at the time of writing after hitting record highs yesterday. On Monday, the rally was fueled by defence-related stocks, which didn’t provide the same level of support on Tuesday.

“The FTSE 100 has retreated from record highs this morning, taking direction from Wall Street where stocks had their worst day of the year so far,” said Derren Nathan, head of equity research, Hargreaves Lansdown

“The time for talking on tariffs is up for now with Donald Trump imposing a blanket 25% border tax on all imports from neighbouring Canada and Mexico. Canada’s hit back already with a 25% charge on $30bn of US imports with more wide-ranging reciprocal action planned for the end of the month.”

In addition to tariffs on Canada and Mexico, Trump doubled tariffs on China to 20%.

There were hopes that Donald Trump was using tariffs as a negotiating tactic, and the market reaction in the US overnight reflects the realisation that the US President is prepared to implement globally damaging trade policies to stop countries ‘stealing’ their money, as Trump puts it.

“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power. Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war,” said Russ Mould, investment director at AJ Bell.

“Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.”

The FTSE 100’s weighting towards defence stocks helped the index outperform yesterday, but general pessimism around global trade dragged the index lower on Tuesday. Natural resource companies were hit, with BP falling over 3% and Glencore taking a 2.5% knock.

Ashtead was the top faller after announcing profit fell 7.5% in the three months to January 31st.

“If Ashtead is a barometer for the health of the US economy, its results imply that the country is coming down with a cold. Third quarter revenue and profit went into reverse as local construction markets felt the pain of interest rates staying higher for longer,” Russ Mould said.

“Ashtead has historically navigated downturns by cutting back on investments in new equipment and making sure its operations are running smoothly so it can go into attack mode when market conditions recover.

“Investors are more concerned about the here and now, hence why the shares continued to fall.”

Fresnillo was among the top risers after announcing a special dividend on the back of a doubling of EBITDA.

Greggs shares tanked on Tuesday after the purveyor of the humble sausage roll said sales growth in early 2025 has slowed to a snails pace.

Following like-for-like 5.5% sales growth in 2024, the baker revealed like-for-like sales for the first nine weeks of 2025 had fallen to 1.7%.

This was too much to bear for some investors who have become accustomed to strong levels of growth and Greggs shares tumbled over 10% in early trade.

“For quite some time it seemed that Greggs could do no wrong,” said Adam Vettese, market analyst at eToro.

“Yet now they have posted another lacklustre update with shares down a whopping 30% this year already. The company blamed challenging weather conditions in January for the slowdown, but aside from the cold snap it is more concerning if there is overall weaker demand for the product.”

Greggs’ success was built on low-cost products, but prices have gradually crept up in recent years. This will play a part in the 11.7% group sales increase over the past year but raises questions about demand going forward.

Inflationary pressures are likely to drag on profits, and Greggs risks having to increase prices further to maintain margins. However, such price hikes will be made against a backdrop of tighter conditions for the consumer, who may not see Greggs as the value option it once was.

“2024 was a year of highs and lows for sausage roll maker Greggs as it surpassed £2bn in revenue for the first time, though conditions deteriorated over the year,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

Record revenue will be of little consequence for investors, with Greggs starting the year on the back foot and key metrics set for a period of depression.

“However, 2025 is shaping up to be a tricky year; consumers are hardly flush with cash, and costs are set to rise as Rachel Reeves’s budget measures take effect,” Britzman said.

The FTSE 100 hit an all-time record intraday high on Monday as defence-related stocks helped power the index higher amid positioning for higher defence spending by European countries.

The disastrous meeting between Ukrainian President Zelenskyy and Donald Trump has been met with fresh pledges of military aid for Ukraine by the UK and other European countries, which are also expected to bolster their military spending.

From a market perspective, investors piled into defence stocks across Europe, with London-listed BAE Systems surging higher.

“The Footsie has surged into the green in a spurt of Monday motivation, with the index hitting a fresh record level,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Better prospects for China’s economy and the expectation of increased state spending on military capabilities are offsetting jitters about fraught geo-politics and US tariffs concerns,” Streeter continued.

“Defence contractors leading the charge higher, with BAE Systems up by more than 18% in early trade. The shocking clash between Trump, Vance and Zelensky has brought the need for Europe to increase collective security into sharp focus. A show of co-operation among leaders at the weekend in London has reinforced expectations that military budgets will swell in a new era of collaboration to counter the Russian threat.”

The composition of the FTSE 100 meant the index shrugged off any concerns about Trump tariffs due on Tuesday and rocketed to intraday records. Rolls Royce’s exposure to the defence sector helped its share rise 5%, extending this year’s gains to 38%.

BAE Systems and Rolls Royce are the FTSE 100’s best performers of 2025 to date. BAE Systems shares have gained more than 39% this year and are set to close at an all-time high on Monday.

While US equities are feeling the pressure of Trump tariffs on Mexico, Canada, and Chine due to kick in on Tuesday, the FTSE 100 was enjoying the possible consequences of tariffs on copper, with miners rallying on the possibility of prices rises.

Antofagasta jumped more than 3% as Anglo American and Glencore rose over 2%.

Bunzl was the FTSE 100 top faller after profit before tax fell 3.6% in the year ended 31st December and the group said they were facing uncertainties. Shares were down 8.5% at the time of writing.

“Falling prices as we emerge from an inflationary period have been a headwind for Bunzl’s revenue growth and while this effect is beginning to wear off, underlying growth looks set to remain subdued,” said Russ Mould, investment director at AJ Bell.

“Bunzl typically pursues expansion through acquisitions so leaning on M&A is not unusual for the group, although the recently acquired catering outfit Nisbets had a tough 2024.

“Investors may have taken note of the uptick in net debt, although the company’s strong cash generation meant it still felt able to hike the dividend and unveil a major share buyback.”