The US stock market tumbled deeply into the red on Thursday as the White House clarified its plan for a massive 145% tariff on China, escalating the ongoing trade war. The Dow Jones Industrial Average, after rising nearly 3,000 points Wednesday, had a volatile day in the red on Thursday. The blue-chip index fell 1,015 points, or 2.5%, pulling back after plunging as much as 2,100 points midday.
The S&P 500 fell 3.46%, and the Nasdaq Composite slid 4.31%. The US dollar index, which measures the dollar’s strength against six foreign currencies, dropped 1.7% Thursday, hitting its lowest level since early October. The dollar has broadly weakened this year, reflecting investors’ concerns about the health and stability of the US economy.
Gold prices hit a fresh record high above $3,170 a troy ounce, as the yellow metal, considered a safe haven amid economic and geopolitical turmoil, posted its best quarter since 1986. Traders were initially relieved when Trump temporarily rescinded his so-called reciprocal tariffs for 90 days. Those tariffs placed hefty levies between 11% and 50% on dozens of countries.
Stock futures also responded somewhat positively to the European Union’s announcement to ease trade tensions. However, optimism was short-lived. Economists caution that the damage may already be done.
The president’s massive import taxes have inflicted significant damage, and according to some, there is still an elevated risk of a US and global recession. Stocks remain well below their levels before Trump unveiled his “Liberation Day” tariffs, and large stock market losses coupled with existing tariffs and high uncertainty about American trade policy contribute to fears of economic decline. Goldman Sachs stated Wednesday after Trump’s partial detente that the likelihood of a US recession remains significant.
JPMorgan echoed this sentiment, maintaining a 60% chance of a US and global recession despite Trump’s decision to unwind some of his “draconian” country-specific tariffs. The CBOE Volatility Index, or Wall Street’s fear gauge, surged 40% Thursday.
Markets react to escalating tariffs
The VIX briefly traded above 50 points midday—a rare level associated with extreme volatility. New data on Thursday showed that inflation in the US slowed sharply in March, yet the focus on Wall Street remains on tariffs and the economic outlook. Meanwhile, the trade war with China continues to escalate.
Goods coming from China to the United States are now subject to at least a 145% tariff, the White House clarified Thursday. In response, Beijing’s retaliatory 84% tariffs on US imports to China took effect. Though China remains willing to negotiate, a spokesperson for the Chinese Commerce Ministry reiterated that China will not back down if Trump further escalates the trade war.
Some billionaire investors, who have pressured Trump to back off his punishing tariffs, were relieved by the temporary pause. Ray Dalio expressed hope for constructive negotiations. However, signs of stress remain in various markets.
The 10-year Treasury yield, while cooling slightly, remained above 4.3% Thursday—an indication of ongoing investor caution. Oil prices also remained under pressure. US oil fell below $60 a barrel, near its April 2021 levels.
Brent crude, the global benchmark, also fell by 4% to around $63 a barrel. Despite the tumult in US markets, global markets saw a sharp recovery on Thursday. Japan’s benchmark Nikkei 225 index finished more than 9% higher, while South Korea’s Kospi index was up 6.6%.
Hong Kong’s Hang Seng index jumped 2.1%, and Taiwan’s Taiex rose 9.3%. In Australia, the ASX 200 closed up 4.5%. European stocks surged following the European Commission’s announcements.
