The shockwave sprinted through Wall Street on Thursday after a new swept round of tariffs over economic forecasts, spurred an intensification on global growth and sent a stock market overturn.
The S&P 500 fell almost 5% on Thursday, marking the worst at the height of the coronavirus pandemic since June 2020.
The decline on Thursday comes after the S&P 500 had already declined for five of the last six weeks, and then strengthened economic concerns pressured by customs talks.
The trembling spreads even more than mere inventory. Scale of inflation expectations jumped, intensifying the fear of slowing the economy, lowering the dollar against all currencies in groups of ten countries. Investors rushed to the safety of government debt.
Confusion broke out after President Trump announced new 10% baseline tariffs on all imports on Wednesday, as well as additional country-specific taxes on goods from many other countries. They included an increase in total tariffs on Chinese imports to 54%.
In a period of already broken markets with uncertainty, tariffs that exceeded Trump's expectations have presented new challenges to investors and economists' outlook.
While some economists now predict inflation from tariffs will raise interest rates, investors are betting that the economic shock will cut the Federal Reserve more quickly.
“Trump's tariff plans represent a shift from perhaps the biggest uncertainty to the biggest pessimism,” said Jeff Buchbinder, chief equity strategist at LPL Financial.
Other analysts and investors simply expressed their perplexity.
The Trump administration has changed tariff estimates imposed on the US to include adjustments to what it deemed a currency manipulation and other taxes, and analysts have questioned the analytical basis for this.
“They might have been in a room throwing darts on a dartboard,” said Andrew Brenner, head of international bonds at International Alliance Securities.
“Trump is going to go to war with the nation about this,” he said. “That's ridiculous. It doesn't show any understanding of what he's doing to other countries. And it's going to hurt the US.”
Market response clearly reflects a sense of surprise that took hold of Wall Street after tariffs were announced on Wednesday.
Peter Tochir, Head of Macro Strategy at Academy Securities, said: “I think it's a disaster.”
Many major US companies sank as soon as trading began on Thursday. Some of the worst hits when the day unfolded were technology stocks.
Consumer brand stocks have slumped as they, for example, have imposed 46% in Vietnam and 32% in Indonesia as the Trump administration imposed sudden tariffs on countries that manufacture hubs for shoes and clothing. Nike's shares fell more than 14%.
In Europe, shares of Puma and Adidas fell 10.7% after falling alongside stocks of Pandora, a Danish jewelry company that manufactures products in Thailand.
The Stoxx Europe 600 fell 2.6% on Thursday, bringing most sectors to red, including banking, technology and consumer goods. Stocks of Danish shipping giant Maersk fell for fear of a slowdown in global trade, but large European banks including HSBC, Commerzbank and Deutsche Bank also fell.
In Asia, stocks have fallen due to a wide range of companies, including technology and semiconductor giants and major auto exporters. Stocks of Japanese automaker Toyota fell more than 5% on Thursday, while South Korea's Samsung Electronics fell nearly 3%.
Investors flocked to government debt as shelters. The yield on US Treasury debts over the decade, which moves back to prices, fell to a minimum of 4.04% since October. Trump has taken 10-year yields as a measure of success in rate cuts, but analysts warn that recent declines reflect concerns about the economy.
The outlook that global economic growth was weak also focused on products. Oil prices have fallen even further after the OPEC oil cartel and its allies accelerated plans to increase supply. International benchmark Brent crude fell by more than 6%, calming at $70.14 a barrel.
Stock markets have been cut off around the world in recent weeks as investors are being whipped by the administration's mixed messages on tariffs. Trump previously announced tariffs on Canada, Mexico, steel, aluminum, cars and auto parts, delays, changes and ultimately imposed.
Uncertainty about tariff levels, and how long they lasted, made it difficult for investors, economists and policymakers to assess the potential impacts of consumers, businesses and the broader economy.
Olu Sonola, head of US economic research at Fitch Ratings, said the US tariff rate for all imports is currently around 22%, starting from 2.5% in 2024. The rate was last seen around 1910, he said.
With Thursday's fall, the S&P 500 is back in the revised area, defined as a line of sand for investors assessing the severity of the recent decline, with a drop of more than 10% from its recent peak. The index is currently more than 12% below the peak, which peaked in February.
Signs of worry are also revealed in the rapid rise in gold prices, which have risen alongside inflation concerns. Investors flocked to precious metals, gaining 19% in their first three months since 1986, bringing the largest quarter gain since 1986. On Thursday, gold traded at over $3,100 per troy ounce, reaching about 3.5% in the year after.
While many investors are concerned about the inflationary effects of tariffs, a decline in bond yields and a decline in the US dollar suggests that most are more concerned about declining economic growth.
Investors have come to suggest that the Federal Reserve may need to cut interest rates more aggressively. Traders have bet on three more quarterpoint cuts this year, but the fourth chance is increasing, financial markets imply.
Some investors hoped that Wednesday's tariff announcement would cure some of the uncertainties in the financial market. But few people really hoped that this news was the end of Trump's tariff talk and would end stock market volatility.
“Investors no longer see tariffs as a one-off event risk, but they are always present risks,” said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets, adding that the market's current expectations are sustained.
Colby Smith Reports of contributions.
