Shockwaves reverberated through Wall Street on Thursday after a new, sweeping round of tariffs upended economic forecasts and intensified worries about global growth, sending stock markets tumbling.
The S&P 500 fell almost 5 percent on Thursday, its worst showing since June 2020 at the height of the coronavirus pandemic.
Thursday’s decline came after the S&P 500 had already fallen for five of the last six weeks, amid intensifying economic concerns pressured by tariff talk.
The tremors spread further than just stocks. Measures of inflation expectations jumped, intensifying fears of an economic slowdown and sending the dollar down against every currency of the group of 10 nations. Investors rushed to the safety of government debt.
The turmoil erupted after President Trump announced on Wednesday a new 10 percent baseline tariff on all imports as well as additional, country-specific taxes on goods from a host of other countries. Those included increasing total tariffs on Chinese imports to 54 percent.
In a period in the markets that has already been wracked with uncertainty, Mr. Trump’s higher-than-expected tariffs presented a new challenge to investors’ and economists’ outlooks.
While some economists are now forecasting that the inflation from tariffs will keep interest rates elevated, investors are betting that the shock to the economy will force the Federal Reserve to cut rates more rapidly.
“Trump’s tariff plan probably represents a shift for markets to quickly move from max uncertainty to max pessimism,” said Jeff Buchbinder, the chief equity strategist for LPL Financial.
Other analysts and investors simply expressed bewilderment.
The Trump administration modified its estimates of the tariffs imposed on the United States to include adjustments for what it deemed currency manipulation or even other taxes, with analysts questioning the analytical basis for doing so.
“They might as well have been in a room throwing darts at a dart board,” said Andrew Brenner, head of international fixed income at National Alliance Securities.
“Trump is going to war with countries on this,” he said. “It’s ridiculous. It shows no comprehension as to what he is doing to other countries. And it is going to hurt the U.S.”
The market reaction clearly reflected the sense of surprise that gripped Wall Street after the tariffs were announced on Wednesday.
“The numbers are shockingly high compared to what people were expecting and it is inexplicable in many ways,” said Peter Tchir, head of macro strategy at Academy Securities. “I think it’s a disaster.”
Many major U.S. companies sank as soon as trading began on Thursday. Some of the worst hit as the day unfolded were technology stocks.
Shares in consumer brands also slumped as the Trump administration imposed steep tariffs on countries that are manufacturing hubs for shoes and clothing, for example a 46 percent tariff on Vietnam and 32 percent on Indonesia. Nike’s shares dropped more than 14 percent.
In Europe, shares of Puma and Adidas tumbled alongside the stock of Pandora, a Danish jewelry company that makes its products in Thailand, which fell 10.7 percent.
The Stoxx Europe 600 fell 2.6 percent on Thursday, with most sectors, including banks, technology and consumer goods, in the red. Shares in Maersk, the Danish shipping giant, fell on fears of a global trade slowdown, while big European banks including HSBC, Commerzbank and Deutsche Bank, also slumped.
In Asia, the stocks tumbled for a wide range of companies including technology and semiconductor giants, as well as major auto exporters. Shares of the Japanese automaker Toyota fell more than 5 percent on Thursday, while South Korea’s Samsung Electronics fell close to 3 percent.
Investors flocked to government debt as a haven. The yield on the 10-year U.S. Treasury bond, which moves inversely to prices, fell to 4.04 percent, its lowest since October. Mr. Trump has homed in on the 10-year yield as a measure of his success in lowering interest rates but analysts warn that the recent drop reflected mounting worries for the economy.
The prospect of weaker global economic growth also weighed on commodities. Oil prices slumped even further after the OPEC oil cartel and its allies accelerated plans to increase supply. Brent crude oil, the international benchmark, dropped more than 6 percent, settling at $70.14 a barrel.
Stock markets globally have been choppy in recent weeks, as investors have been whipsawed by the administration’s mixed messages on tariffs. Mr. Trump has previously announced, delayed, changed and ultimately imposed tariffs on Canada, Mexico, steel, aluminum, cars and auto parts.
The uncertainty around the tariff levels, and how long they might last, has made it difficult for investors, economists and policymakers to assess the potential ramifications for consumers, businesses and the broader economy.
The U.S. tariff rate on all imports is now around 22 percent, from 2.5 percent in 2024, said Olu Sonola, the head of U.S. economic research at Fitch Ratings. That rate was last seen around 1910, he said.
With Thursday’s drop, the S&P 500 is back in correction territory, defined as a drop of 10 percent or more from its recent peak and a line in the sand for investors assessing the severity of a recent drop. The index is now more than 12 percent below its peak reached in February.
Signs of worry have also been evident in the rapid rise in the price of gold, which has climbed alongside inflation worries. Investors have flocked to the precious metal, sending it 19 percent higher in the first three months of the year, its biggest quarterly rise since 1986. On Thursday, gold was trading at over $3,100 per troy ounce, while a market measure of inflation expectations one year from now shot up to around 3.5 percent.
Although many investors worry about the inflationary effect of tariffs, falling bond yields and a declining U.S. dollar suggest that most are more worried about waning economic growth.
It has led investors to suggest that the Federal Reserve might need to cut interest rates more aggressively. Traders had been betting on three more quarter-point cuts this year, but the chances of a fourth have now increased, financial markets implied.
Some investors had hoped that the tariff announcement on Wednesday would cure some of the uncertainty in the financial markets. But few truly expected the news to be the end of Mr. Trump’s tariff talk and with it an end to the stock market volatility.
“Investors no longer see tariffs as a one-time event risk, but an always-present risk,” said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets, adding that the current expectation in the market is for volatility to persist.
Colby Smith contributed reporting.
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders. More about Joe Rennison
Danielle Kaye is a business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers. More about Danielle Kaye
River Akira Davis covers Japan, including its economy and businesses, and is based in Tokyo. More about River Akira Davis
Eshe Nelson is a reporter based in London, covering economics and business news for The New York Times. More about Eshe Nelson
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