The US stock market experienced a significant downturn on Thursday as the White House clarified its plan for a massive 145% tariff on China. This intensified an already volatile trade war. The Dow Jones Industrial Average fell 1,015 points, or 2.5%, after fluctuating widely throughout the day.
The S&P 500 and Nasdaq Composite dropped 3.46% and 4.31%, respectively. This decline follows a period of brief optimism on Wednesday, when stocks enjoyed their best day since 2008. However, Thursday’s developments served as a harsh reminder of the ongoing economic challenges.
During a Cabinet Room meeting, President Donald Trump acknowledged potential “transition problems” related to the tariff policies. However, he expressed satisfaction with the current state of the country’s trade agenda. “A big day yesterday.
There will always be transition difficulty — but in history, it was the biggest day in history, the markets. So we’re very, very happy with the way the country is running. We’re trying to get the world to treat us fairly,” Trump said.
The US dollar also took a hit, with the dollar index tumbling 1.7% to its lowest level since early October. Gold prices, conversely, hit a new high above $3,170 per troy ounce. This reflects investors seeking safe havens amid economic turbulence.
While Trump’s about-face on some tariffs created brief relief, economists continued to warn of the long-term damage already inflicted. Goldman Sachs and JPMorgan maintained their predictions of a possible recession.
Stocks drop amid trade war shake-up
They cited ongoing trade uncertainties and existing tariffs as critical concerns. The CBOE Volatility Index, a measure of market anxiety, surged by 40% on Thursday. New data indicated a sharp slowdown in US inflation for March.
However, investors remained focused on the tariff developments and future economic outlook. China has not backed down in response. Goods imported from China to the US are now subject to at least a 145% tariff.
Beijing retaliated with 84% tariffs on US imports, adding to the uncertainty. A spokesperson for the Chinese Commerce Ministry emphasized that while China is open to negotiation, it will respond in kind to any further escalations from the US. Billionaire investor Ray Dalio expressed hope that Trump’s decision to pause some tariffs could lead to more constructive negotiations moving forward.
Beyond stocks, the bond market showed signs of strain, with the 10-year Treasury yield rising above 4.3%. This signals continued investor unease. Oil prices also remained under pressure, with US oil falling below $60 a barrel.
Despite the turmoil in US markets, global stocks experienced a sharp recovery on Thursday. Japan’s Nikkei 225 saw a rise of over 9%, and South Korea’s Kospi index increased by 6.6%. Other Asian markets, including Hong Kong and Taiwan, also posted gains.
European stocks surged in response to the shifting trade dynamics. As the US and global markets navigate these volatile times, the full impact of the trade policies remains to be seen. However, the current trajectory points to continued uncertainty and economic headwinds.
