The US stock market plunged into negative territory on Thursday following the White House’s clarification on a massive 145% tariff on China, intensifying a trade war. The Dow Jones Industrial Average, after rising nearly 3,000 points the previous day, experienced a volatile session, ultimately falling 1,015 points, or 2.5%. The S&P 500 dropped 3.46%, and the Nasdaq Composite slid 4.31%.
Despite a temporary reprieve, traders and investors were unsettled by the overall economic damage from President Donald Trump’s tariffs. Trump acknowledged potential “transition problems” on Thursday, but remained optimistic about the long-term outcomes. The US dollar index, which measures the dollar’s strength against a basket of six foreign currencies, tumbled 1.7% on Thursday, reaching its lowest level since early October.
This weakening of the dollar reflects investor concerns about the stability of the US economy. Simultaneously, gold prices surged to a fresh record high above $3,170 a troy ounce, benefiting from its status as a safe haven amid economic uncertainty. Following a short-lived relief rally, market volatility persisted.
Wall Street had briefly celebrated Trump’s temporary suspension of his so-called reciprocal tariffs for 90 days, which imposed hefty levies ranging from 11% to 50% on dozens of countries. However, concerns about the broader economic impact of existing and future tariffs quickly resurfaced. Economists warn that the economic damage from these policies has already been substantial.
Many believe there remains an elevated risk of a US and global recession. Despite Trump’s partial detente, the universal 10% tariff that went into effect last Saturday, along with 25% tariffs on auto imports, steel, aluminum, and various goods from Canada and Mexico, remain in place.
Markets plunge amid tariff tensions
Goldman Sachs maintained that the likelihood of a US recession remains a coin flip, while JPMorgan expressed a 60% chance of a US and global recession even after Trump’s recent steps. The CBOE Volatility Index, Wall Street’s fear gauge, surged 40% on Thursday, signaling extreme market instability. Meanwhile, new data showed that US inflation slowed sharply in March.
While normally welcome news, on Wall Street the focus remained firmly on tariffs and their potential economic impact. China, meanwhile, has not backed down from the escalating trade tensions. Goods imported from China are now subject to a 145% tariff, as clarified by the White House.
On the other side, Beijing’s retaliation included 84% tariffs on US imports, which went into effect Thursday. A spokesperson for the Chinese Commerce Ministry reiterated China’s stance, calling for mutual respect and equality in negotiations, while warning against further escalation. Despite some investors’ relief at Trump’s pause, signs of stress are evident across financial markets.
The bond market’s alarming sell-off somewhat subsided, but bond yields remain high. Similarly, oil prices remained pressured, with US oil falling below $60 a barrel and Brent crude also dropping. In contrast, international markets showed some resilience.
Japan’s Nikkei 225, South Korea’s Kospi, Hong Kong’s Hang Seng, and Taiwan’s Taiex all posted significant gains, reflecting complex global dynamics amid US policy uncertainties. As the markets navigate the fallout from this ongoing trade war, investors and analysts will continue to closely monitor developments and their broad economic implications.
