US stocks got crushed on Thursday, pulling back from the previous day’s historic rally amid concerns that President Trump’s broad trade offensive has become a direct confrontation with China.
The S&P 500 (GSPC) dropped almost 3.5%, while the tech-heavy Nasdaq Composite (IXIC) tumbled 4.3%. The Dow Jones Industrial Average (^DJI) fell about 1,000 points, or 2.5%. The 10-year Treasury yield (^TNX), in high focus amid bond market whiplash, ended the day flat around 4.39%.
The major averages sank to session lows after the White House confirmed updated tariff figures released on Thursday brings the total increased levies on Chinese goods to 145%, not 125% as previously stated.
Wall Street has been weighing Trump’s remarkable escalation in the US trade battle with China while pausing levies on many US trading partners.
Markets on Wednesday had breathed a loud, collective sigh of relief after Trump paused many of the largest US tariff hikes on a list of countries, with stocks notching one of their biggest one-day rallies since World War II.
“The trade war is now turning into a direct confrontation between the US and China … we could again be seeing escalation and de-escalation at the same time, pulling markets in different directions,” Rabobank analysts said.
And though a wider trade war is on hiatus, risks remain to the health of the US economy, and Trump’s move is “merely the end of the beginning,” according to JPMorgan.
Other parts of the president’s trade-policy overhaul are still in effect, including a 10% baseline tariff on most trading partners, 25% duties on steel and aluminum imports, and 25% duties on auto imports. Those elements could still lead to consequences analysts have warned about, such as rising prices and slower economic growth.