US stock indexes suffered a sharp decline on Thursday as President Donald Trump’s sweeping tariffs on major trading partners heightened fears of a full-scale trade war and the risk of a global economic downturn. The selloff was led by heavyweight technology stocks, with Apple, Microsoft, and Nvidia among the worst-hit as investors reacted to the growing uncertainty surrounding international trade.
At 9:40 am ET, the S&P 500 tumbled 3.1%, the Nasdaq Composite fell 4.27%, and the Dow Jones Industrial Average shed 2.6%, all trading near seven-month lows. The tech-heavy Nasdaq, in particular, took a severe hit, reflecting investors’ concerns over the impact of new tariffs on the sector’s global supply chains.
Tech Stocks Take a Beating
Apple sank 8%, reeling from the impact of an aggregate 54% tariff on China, a country that serves as the manufacturing hub for much of its supply chain. Microsoft dropped 3%, while Nvidia, a leading semiconductor company, fell 5.6% as the semiconductor industry faced potential disruptions due to the trade dispute.
Broader Market Fears: Recession and Stagflation
The market reaction was not limited to tech stocks. Retailers, banks, and energy stocks also saw sharp declines as investors scrambled for safe-haven assets.
-
Retail Giants Plunge: Nike lost 11%, and Ralph Lauren tumbled 12% after Trump imposed a fresh round of tariffs on imports from Vietnam, Indonesia, and China—major production hubs for the apparel industry.
-
Banking Sector Hit Hard: Financial stocks bore the brunt of recession fears, with Citigroup and Bank of America each losing over 8%, while JPMorgan Chase & Co fell 4.5%.
-
Oil Prices Slide: Energy stocks also faced pressure as ExxonMobil and Chevron dropped about 3.5% each, mirroring a 6% slump in crude oil prices amid concerns that OPEC+ could accelerate production hikes in response to weakening global demand.
"This was the first bullet fired in this trade war, and it could get nasty," said Elias Haddad, senior markets strategist at Brown Brothers Harriman. "We're going to continue to trade on a heavy tone because of the heightened risk of either recession or stagflation. We could see the correction bottom out when we have firm evidence that we're not falling into recession."
Wall Street's "Fear Gauge" Hits Three-Week High
Reflecting market anxiety, the CBOE Volatility Index (VIX)—often referred to as Wall Street’s "fear gauge"—jumped to a three-week high of 26.91 points, indicating heightened investor uncertainty and the likelihood of further market turbulence.
From Record Highs to Correction Territory
Just a month ago, US stock markets were riding high on the promise of business-friendly policies under the Trump administration. However, the tariff escalation has significantly altered investor sentiment.
-
The S&P 500 and Nasdaq have now fallen 10% from their recent record highs, marking a correction as traders price in the economic damage caused by the tariffs.
-
Analysts warn that if trade tensions escalate further, the markets could enter a bear market—defined as a 20% drop from recent highs.
Traders Bet on Multiple Fed Rate Cuts
The worsening trade outlook has fueled speculation that the Federal Reserve will be forced to cut interest rates aggressively to counteract economic risks.
-
Traders are now expecting the Fed to cut rates at least three times this year, with a fourth cut no longer seen as unlikely.
Friday's upcoming US payroll data and Fed Chair Jerome Powell’s speech will be closely watched for clues about the central bank’s next move.
"The prospect of looser monetary policy and potentially greater fiscal stimulus, once the Trump administration announces its tax cut plan, should provide some support to equity markets," Haddad added.
Global Markets React: Flight to Safety
The ripple effects of the US market decline were felt across global markets:
-
Asian and European stocks tumbled, as investors reacted to the risk of a full-blown trade war.
-
Government bond yields fell, with investors rushing into safer assets.
-
Gold prices surged to a record high, reflecting increased demand for safe-haven investments amid economic uncertainty.
What’s Next?
With markets in turmoil, the next few weeks will be crucial in determining whether the selloff stabilizes or deepens into a prolonged downturn. The Trump administration’s next trade moves, along with the Federal Reserve’s policy response, will play a key role in shaping the direction of the economy and the markets.
As the US and its trade partners brace for possible retaliatory tariffs, investors remain on edge, fearing that this is just the beginning of a much larger global economic slowdown.
