Associated Press Business Writer Stanchion
NEW YORK (AP) – Financial markets around the world are shaking Thursday following President Donald Trump’s latest and toughest tariff set, with U.S. stock markets now having the worst so far.
The S&P 500 is down 4.3% in morning trading than other major stock markets, and is on track on its worst day since Covid shattered the global economy five years ago. The Dow Jones industrial average fell 1,538 points (3.6%) as of 10:55am Eastern time, with Nasdaq Composite down 5.6%.
Fears flare around the global fires around the potentially toxic mix of higher inflation and the weakening of economic growth that tariffs could create, making it harder for financial markets.
Everything has dipped, from crude oil to massive high-tech stocks to the value of the US dollar over other currencies. Even gold, which recently hit the record, was pulled lower as investors wanted something safer to own. Some of the worst hits are surrounded by small American businesses, with the Russell 2000 index of small stocks down 6.6% to what is called the “Bear Market” after losing more than 20% from the record.
Investors around the world knew Trump would unveil a drastic set of tariffs late Wednesday. And the fears surrounding it were already 10% below Wall Street’s main health measure, the S&P 500 index. But according to Sanctuary Wells Chief Investment Officer Mary Anne Bartels, Trump still surprised them with “the worst tariff scenario.”
Trump has announced a minimum 10% tariff on imports, with tax rates much higher for products in certain countries in China and the European Union. According to UBS, it is completely “plausible” to levels comparable to levels not seen in about a century, potentially reducing US economic growth by 2 percentage points and increasing its economic growth by nearly 5%.
According to Bhanu Baweja and other strategists at UBS, such hits are so scary that they “make their rational minds think low.”
Wall Street has long assumed that Trump would simply use tariffs as a tool for negotiations with other countries, not as a long-term policy. But Wednesday’s announcement may suggest that Trump thinks it will help resolve his ideological goals. This is to take manufacturing jobs to the US in a process that could take years more than opening bets in a poker game.
If Trump follows his tariffs, stock prices may need to fall by more than 10% from an all-time high to reflect a possible global recession, along with a blow to the profits that US companies can take. The S&P 500 is just below 11% from records recorded in February.
Sean Sun, portfolio manager at Thornburg Investment Management, said that Trump’s announcement on Wednesday saw more opening moves than policy endpoints, but “the market can actually be undervalued.
One wildcard is that the Federal Reserve can cut interest rates to support the economy. That’s what I did at the end of last year before it was suspended in 2025. Low interest rates help by making it easier for American businesses and households to borrow and spend.
Along with general fears about the health of the US economy, Treasury yields have fallen in part by rising expectations for cuts. The 2010 Treasury yield fell to 4.02% from 4.20% in the second half on Wednesday, down from around 4.80% in January. That’s a big move for the bond market.
However, the Fed may have less freedom to travel than it would like. Lower rates can overshadow the economy, but they can also push inflation upwards. And concerns have already been exacerbated due to tariffs, especially as households in the US are branching out due to a sharp increase in bills.
Of course, the current economy is still growing. A report on Thursday said few U.S. workers applied for unemployment benefits last week. As economists were hoping for an increase during unemployment, a relatively solid job market was linchpin to protect the economy from recession.
Another report said last month that transport, finance and other companies in the services industry were active. However, growth was weaker than expected, giving companies a complicated picture of how conditions are unfolding.
One business said in a survey by the Supply Management Institute that it improved sales and traffic for example at restaurants. But another said tariffs and “the resulting delays have wreaked havoc in supply chains and delivery” on wood imported from Canada. A third of the construction industry said, “We are beginning to recognize the impact of aluminum tariffs. These costs will be passed on to our customers.”
Worries about possible stagflation have knocked down all sorts of stocks, leading to four drops in the five that make up the S&P 500.
Best Buy has dropped by 15.1% as the electronics they sell are made all over the world. United Airlines lost 13.1% as customers worried about the global economy don’t feel comfortable enough to fly so much for business or take vacations. Target fell 11.8% amid fears that customers are still narrowing down by high inflation, but could be even more stressed.
In overseas stock markets, the index fell sharply around the world. France’s CAC40 fell 3.4%, while Germany’s DAX lost 2.9% in Europe.
Japan’s Nikkei 225 fell 2.8%, Hong Kong’s Hangsen lost 1.5%, and Korea’s Kospi fell 0.8%.
AP business writers Matt Ott and Elaine Kurtenbach contributed.
Original issue: April 3, 2025 9:44am EDT
