Wall Street swung between sharp and more modest losses on Monday as stock markets worldwide sank on concerns President Donald Trump’s tariffs may ignite a punishing trade war.

The S&P 500 was down 0.9% in afternoon trading after Asian and European indexes logged worse drops. The Dow Jones Industrial Average was down 155 points, or 0.4%, as of 1:11 p.m. Eastern time, and the Nasdaq composite was 1.4% lower.

The U.S. stock market had been on track for a much worse loss itself, with the Dow down 665 points shortly after the start of trading, on worries about how much pain U.S. companies would feel because of the tariffs. Some of the heaviest losses hit Big Tech and other companies that could be hurt most by the higher interest rates that could ultimately result from the U.S. tariffs announced on imports from Canada, Mexico and China.

But U.S. stocks pared their losses after Mexican President President Claudia Sheinbaum said tariffs on her country’s goods are on hold for a month following a conversation with Trump.

The ultimate fear is that Trump’s tariffs will push up prices for groceries, electronics and all kinds of other bills for U.S. households, putting upward pressure on a U.S. inflation rate that’s largely been slowing since its peak three summers ago. Stubbornly high or accelerating inflation could keep the Federal Reserve from cutting interest rates, which it began doing in September to give the U.S. economy a boost.

Much of Wall Street had been hoping Trump’s talk of tariffs through the presidential campaign was just that, talk, and an opening point for negotiations with U.S. trading partners. Traders came into Monday morning thinking Trump followed through, raising fear about a potentially escalating trade war that damages economies worldwide, including the United States.

That pushed traders to quickly pare expectations for how many cuts to interest rates the Federal Reserve may deliver this year, if any. Lower interest rates can encourage U.S. employers to hire more workers, while also goosing prices for investment, but the downside is they can give inflation more fuel.

“Living in the Midwest, I might feel the trade war soonest and most,” said Brian Jacobsen, chief economist at Annex Wealth Management, because of how much crude oil flows over the northern U.S. border to make gasoline. “Our refiners can’t easily switch away from Canadian crude.”

Crude oil prices swung sharply Monday. The price for a barrel of benchmark U.S. crude topped $74.50 in the morning before pulling back to $72.58, up 0.1%, after Mexico’s announcement of the pause on tariffs.

Trump himself warned Americans they may feel “some pain” from the tariffs, which he said would be “worth the price” to make America great again. He also said Sunday night that import taxes will “definitely happen” with the European Union and possibly with the United Kingdom as well.

Some on Wall Street remain skeptical about how long a trade war may last, especially considering how closely Trump pays attention to the stock market. An escalating trade war can cause sharp drops on Wall Street, as Monday morning quickly demonstrated, and “significant stock market volatility could lead to a change in approach,” said Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.

Constellation Brands, the company that sells Modelo and Corona beers in the United States, fell 2.5%. Best Buy, which sells electronics made around the world, lost 3%. Brown-Forman, which sells Jack Daniel’s and other alcohol in Canada, fell 2.5%.

Instead of stocks and crypto, investors moved instead into longer-term U.S. government bonds, which are seen as some of the safest possible investments. The resulting rally in their prices drove Treasury yields down.

The yield on the 10-year Treasury fell to 4.52% from 4.55% late Friday.

It’s a reprieve, at least temporarily, from a rise in longer-term Treasury yields that had shaken Wall Street in recent months. Yields had climbed in part on worries about just such tariffs from Trump, and the possible result of higher interest rates they could entail.

Short-term Treasury yields rose Monday as expectations waned for cuts to rates from the Fed. The yield on the two-year Treasury rose to 4.24% from 4.21%

Higher yields put pressure on all kinds of investments, but they’re particularly burdensome on stocks seen as the most expensive.

That puts the spotlight on companies like Nvidia and other winners of the artificial-intelligence boom. Nvidia fell 3.4% and was one of the heaviest weights on the S&P 500.

Such AI superstars had already come under pressure last week, after a Chinese upstart said it had developed a large language model that could perform as well as big U.S. rivals, but without having to use the most expensive, top-flight chips.

Trump’s tariffs took center stage in a week where other events would typically take the spotlight, including a report on Friday showing how many workers U.S. employers hired last month. A slew of profit reports are also due this week from Alphabet, Amazon and other highly influential companies.

In stock markets abroad, indexes fell 1% in London, 1.2% in Paris and 1.4% in Frankfurt. In Asia, South Korea’s Kospi sank 2.5%, and Japan’s Nikkei 225 fell 2.7%.