The Dow Jones Industrial Average plunged 1,679.39 points, or 3.98%, to close at 40,545.93 on Thursday. This marked the index’s worst session since June 2020. The S&P 500 dropped 4.84% to settle at 5,396.52, also posting its worst day since June 2020.
The Nasdaq Composite plummeted 5.97%, ending at 16,550.61 and registering its biggest decline since March 2020. The market downturn followed President Donald Trump’s announcement of sweeping tariffs, raising the risk of a global trade war. More than 400 of the S&P 500’s constituents posted losses, with the index falling to its lowest level since before Trump’s election win in November.
Shares of multinational companies and big sellers of imported goods were among the hardest hit, with some companies losing nearly 28%. Tech shares also suffered in the risk-off mood, with some major tech players falling almost 8%.
Markets react to Trump tariffs
Trump’s tariff plan includes a baseline rate of 10% on all countries, effective April 5, with higher duties against countries that levy higher rates on the U.S. The effective tariff rate for China is now 54%, including new reciprocal rates and existing duties. Investors sought safety in bonds, causing the benchmark 10-year Treasury yield to fall as low as 4%. Bank stocks faced outsized losses, with some enduring their biggest one-day slides since the regional banking crisis in March 2023.
Small-cap stocks entered a bear market, down more than 21% from their November 25 record close. Fitch Ratings estimated that Trump’s new tariffs imply an overall tariff rate of 25%, the highest effective tariff rate in more than 115 years. The agency noted that the tariffs are transforming the global economic outlook, raising U.S. recession risks and constraining the Federal Reserve’s ability to lower interest rates further.
Trump acknowledged the market sell-off, likening the implementation of tariffs to “an operation.” He assured that the markets, stock, and country would “boom” and that the rest of the world wants to see if they can make a deal. However, JPMorgan economists warned that if the new tariff rates are sustained and not negotiated lower, it will have severe repercussions on the economy. The market performance on Thursday highlighted investor fears over the economic implications of the new tariffs and the potential for a broader global trade war.