The day after the market's biggest rally in nearly 17 years, Wall Street stocks fell on Thursday, with the White House saying President Trump had raised tariffs on Chinese goods to 145%.
Markets around the world are being abused, from stocks to government bonds, energy futures and energy futures, as Trump steadily ratcheted his campaign to raise taxes on imports of all kinds. His announcement last week was that dozens of US trading partners would be subject to tariffs to commence a few days of meltdowns.
The S&P 500 had surged high Wednesday afternoon after Trump announced a 90-day hiatus on most of these tariffs. Although 10% tax remains in most countries, products from China will receive tariffs at a 125% tax rate, he said Wednesday. The tariffs imposed on cars and auto parts recently, as well as steel and aluminum, will remain intact.
On Thursday, the White House explained that the 125% tariffs announced on Wednesday are in addition to the fact that 20% has already been introduced in China. In other words, China's total imports are currently 145%.
The S&P 500 was already low before its clarification, but fell sharply on Thursday. Early afternoon trading saw a drop of about 5%. I've returned about half the profit from the previous day.
In government bond markets, which have issued warnings about potential damages from the trade war, the US Treasury has started selling again. Treasury yields rose to 4.37% in 2010, the highest since February. Indicators of the value of the US dollar against other major currencies fell by about 1.8%. The sale of US government bonds and dollars has caught many investors off guard as it is considered the safest corner for investors during a period of chaos.
Analysts warn that even with a short grievance on global tariffs, US tariffs will remain far higher than before Trump took office, and trade policy is unpredictable.
“Despite the good news, policy uncertainty continues to rise and acts as a resistance to the US economy,” wrote James Rossiter, head of global macro strategy at TD Securities, in a memo. “Companies struggle with planning.”
There were other signs of concern about the economic impact of the fierce trade war between the US and China. Oil prices fell about 4%, with international benchmark Brent crude trading at under $63 per barrel.
The technology-rich Nasdaq Composite Index fell nearly 7%, with stocks in Apple, Nvidia and other tech giants falling.
Businesses are beginning to warn that trade wars will prevent economic uncertainty from predicting the remaining revenue and sales of the year.
“We are focused on business growth and are continuing to advance towards our long-term goals, but given the potential impact of broader macro factors, we are removing the time frames associated with them,” Carmax says. Analysts expect the 25% tariff on imported cars, which came into effect last week, is likely to raise car prices, lower sales and cause other disruptions in the automotive industry.
On Wednesday, Delta said the lack of clarity on the economy has prevented investors from telling them how much money they will make this year. The economists also warned that the remaining tariffs in China alone would have a major impact on the US economy.
Wendong Chang, assistant professor of applied economics and policy at Cornell, noted that “many products are products that are primarily from China,” including 73% of smartphones, 78% of laptops, 87% of video game consoles and 77% of toys. “Resources from other countries are time-consuming and much more expensive,” Zhang said in an interview Wednesday.
Wall Street slump on Thursday comes after major Asian and European benchmarks suddenly surpassed the day. In Asia on Thursday, the benchmark index rose more than 9% in Taiwan and Japan and 6% in South Korea. In Europe, the Stoxx Europe 600 index jumped over 5%. The German and French markets each achieved more than 5%.
Takashima, executive economist at Tokyo's Nomura Institute, said Trump's latest moves show that it focuses on cutting the US trade deficit and preparing for a trade war with China.
That means that in many countries like Japan and South Korea, “the risk has not been significantly reduced.” This counts China and the US as top trading partners, Qing said.
The Chinese government is taking steps to stabilize the market. State-owned companies announced Tuesday that they would buy back some shares. This is usually a move that helps raise stock prices. On Thursday, the influential state-run media outlet released a commentary that it is a good time for central banks to cut interest rates and take other measures to support the economy.
Berry One Contributed research from Hong Kong.
