Stocks fell sharply in the United States on Thursday as investors assessed the potential economic impact of the latest round of Trump administration tariffs.
The Dow Jones Industrial Average fell 1,679 points, or 4%, to close at 40,546. The S&P 500 fell 274 points, or 4.8%, in its worst one-day drop since Covid-19 disrupted financial markets in 2020. According to FactSet data, this represents a loss of approximately $2 trillion.
The tech-heavy Nasdaq also had its worst session since the pandemic, falling more than 1,050 points, or nearly 6%. That drop reflects investor concerns about how high tariffs on China, Taiwan, Vietnam, and other manufacturing hubs will affect technology companies, according to analysts.
Asian stocks fell further on Friday, but markets in Shanghai, Taiwan, Hong Kong, and Indonesia were closed for holidays, limiting the day’s losses, according to The Associated Press. Tokyo’s Nikkei 225 dropped 2.8%, while South Korea’s Kospi fell 0.9%.
According to the Associated Press, European markets lost more ground in early trading, with Germany’s DAX down 0.7%, Paris’s CAC 40 down the same amount, and Britain’s FTSE 100 down 0.6%.
According to Bloomberg, futures trading in US stocks showed continued leakage, albeit not as dramatic as Thursday’s plunge. The Dow was down 200 points at 3:23 a.m. EDT, the S&P was down 25.25 points, and the Nasdaq was down 54.75 points.
Apple shares fell nearly 10% on Thursday, despite the fact that the company has diversified its international supply chains in recent years and still manufactures the majority of its iPhones in China. The new duties increase the nominal US tariff rate on China to 54%.
“Investor psychology has been destroyed, and dip buyers are nowhere to be seen,” equity analyst Adam Crisafulli, head of Vital Knowledge, said in a research note. “All the efforts to spin recent events positively are increasingly falling flat.”
Highlighting the scope of the losses: Nearly every major industrial sector experienced declines, with tech companies, banks, retailers, apparel manufacturers, and airlines among the hardest hit. Shares of Best Buy, United Airlines, Nike, and AI powerhouse Nvidia all fell by approximately 18%, 16%, and 8% respectively.
On Wednesday, President Trump announced a 10% tariff on all US trading partners, as well as increased levies on dozens of countries that charge higher taxes on American exports. Mr. Trump has stated that the goal is to make global trade more fair, encourage companies to expand in the United States, and generate federal revenue.
Experts warn that sharply increasing tariffs on imports, combined with any retaliatory measures from other countries, could raise inflation, reduce consumer and business spending, and harm economic growth.
“Market uncertainty is likely to remain elevated in the weeks ahead, as investors consider likely downgrades to consensus U.S. economic and earnings growth forecasts, the risk of a tit-for-tat escalation in tariffs, and the potential scope for announced tariffs to be negotiated down,” Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management, said in a note to investors.
On CNN Thursday, White House Press Secretary Karoline Leavitt expressed confidence that the Trump administration’s economic policies would pay off. Commenting on the global financial markets’ overnight decline, she said, “To anyone on Wall Street this morning, I would say trust President Trump.”
Souring sentiment
Financial markets soared following Mr. Trump’s re-election in November, with Wall Street expecting lower taxes and deregulation to boost corporate profits.
Other investors expected the Trump administration to threaten tariffs primarily as a means of pressuring other countries into making trade concessions, rather than as a full-fledged push to change the terms of global commerce.
However, after reaching all-time highs in February, stocks have fallen as the White House confirms it was not bluffing. Investors have been taken aback by the speed and scope of Mr. Trump’s tariffs.
In contrast to his first term, when he imposed tariffs on roughly $380 billion in goods over four years, Mr. Trump has imposed more than $3 trillion in tariffs in less than three months since retaking office, according to the Economic Policy Institute, a left-leaning think tank.
“Markets may be underreacting, especially if these rates are final, given the potential impact on global consumption and trade,” said Sean Sun, portfolio manager at Thornburg Investment Management.
With its Thursday plunge, the S&P 500 is now down 8.2% this year, the Dow is down 4.7%, and the Nasdaq is down 14.3%.
Despite the angst on Wall Street, economists note that the United States continues to grow, and most still predict a mild recession. Hiring in the United States remains strong, with the national unemployment rate hovering around 4%.
Meanwhile, for borrowers, additional signs that the economy is about to stall could prompt the Federal Reserve to lower its benchmark interest rate. The central bank last cut rates in December 2024, but they have remained stable since then as policymakers seek to combat inflation.
