US stocks tumbled Tuesday afternoon, erasing a brief morning rally, as fears around escalating trade tensions with China resurfaced. The Dow fell 320 points, or 0.84%, while the broader S&P 500 dropped 1.57%, and the tech-heavy Nasdaq Composite slid 2.15%. The S&P 500 closed at its lowest level in almost a year, while the Dow and Nasdaq both closed at their lowest levels since January 2024.
President Donald Trump plans to impose an additional 84% in levies on all Chinese imports on Wednesday, bringing the total tariff on Chinese goods to at least 104%. This announcement by White House Press Secretary Karoline Leavitt caused the S&P 500 and Nasdaq, which had surged as much as 4% and 4.5% respectively, to tumble midday. At its lowest point of the day, the S&P 500 briefly dipped into bear market territory (down 20% from its record high in February) before pulling back and closing down 18.9% from that peak.
Investors appeared to be seeking some buying opportunities despite the gloomy outlook. Wall Street’s fear gauge, the VIX index, surged higher Tuesday after spiking to historic levels over the past two sessions. Recent market carnage has been driven by fear that Trump’s tariff policy could plunge the US into a recession.
Stocks fall amid rising tariffs
The markets had initially reacted positively to rumors that the White House might pause the tariff increases, although those hopes were quickly dashed. Investors remain on edge for updates from the White House regarding trade negotiations.
White House National Economic Council Director Kevin Hassett mentioned ongoing negotiations with Japan and South Korea and said Trump is prioritizing these two allies. On Monday, Trump spoke with Japan’s Prime Minister Shigeru Ishiba, who will be sending a team to Washington to negotiate a trade deal. In the broader global market, the European Union’s executive arm responded to Trump’s grievances by agreeing to purchase more American liquefied natural gas.
US Trade Representative Jamieson Greer noted during a hearing before the Senate Finance Committee that the administration is in talks with about 50 countries to address trade imbalances and non-tariff barriers. The escalating trade war between the US and China has become a high-stakes game, with both nations standing firm. The Commerce Ministry of China reiterated that the country would continue to stand up to Trump, despite the risks of a damaging trade war that could hurt both economies.
Recession fears loom large, as multiple Wall Street banks, including Goldman Sachs and JPMorgan Chase, have warned that further escalation could lead to a global downturn. Despite some optimism from Trump’s top trade adviser Peter Navarro, who predicted a market rebound, others remain wary of the long-term economic impacts of the tariffs.
