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A harsh sell-off on Wall Street continued on Thursday as banks and investors cautioned that Donald Trump’s tariffs could lead the US into a recession, despite the president retreating from an all-out trade war.
The S&P 500 fell by 3.5% in a volatile trading day, a stark contrast to the previous session’s impressive 9.5% increase. The index is now down 6.1% for the month of April.
The tech-heavy Nasdaq Composite dropped 4.3% following its best performance since 2001. In the currency markets, a dollar index against six major currencies decreased by 1.9%, as investors moved away from US assets, boosting the Japanese yen, euro, and UK pound.
Markets had surged on Wednesday after Trump announced a 90-day pause on the steep “reciprocal” tariffs affecting several countries. This rally provided a temporary relief from the significant selling that had affected US markets, which recently spilled over into the $29 trillion Treasury market, a cornerstone of the financial system.
However, Wall Street banks and investors warned that the president’s decision to impose tariffs on Chinese imports of up to 145% and to maintain a universal 10% tariff poses a major risk to the US economy.
“With ongoing policy disarray regarding trade and fiscal matters, coupled with substantial losses in equity markets and a decline in confidence, it is hard to envision the US skirting a recession,” commented JPMorgan.
Goldman Sachs also stated that it was “premature for an ‘all clear’” and indicated that while some immediate risks have been alleviated, policy uncertainty remains elevated and is likely to dampen consumer and business activities.
US Treasuries experienced a wave of selling on Thursday, with the yield on the benchmark 10-year note rising by 0.11 percentage points to 4.41%, leaving it approximately 0.1 percentage points shy of the week’s peaks.
The markets continued to experience significant pressure while Trump held a televised cabinet meeting at the White House. Treasury Secretary Scott Bessent, when asked about the market declines, remarked, “I don’t see anything unusual today.” This was in response to Trump stating he hadn’t monitored the markets on Thursday.
Trump mentioned about China: “We would love to reach an agreement. They have taken advantage of our country for an extended time.” He added that he was ready to reintroduce the broad reciprocal tariffs if other countries fail to negotiate new trade deals with the US.
As planned, China implemented additional 84% retaliatory tariffs against the US, raising its total levy on American imports to over 100%. President Xi Jinping indicated he would not yield in the escalating trade conflict, although Beijing did not promptly react to Trump’s even higher tariff rates.
“If you want to talk, the door is open, but the dialogue must be conducted based on mutual respect and equality,” stated China’s commerce ministry. “If you prefer to fight, China will battle to the end. Pressure, threats, and coercion are not the correct ways to deal with China.”
The renminbi fell to its lowest value since 2007, signaling that Beijing is willing to allow a gradual depreciation in response to US tariffs.
Concerns regarding the escalating trade war between the world’s two largest economies further drove oil prices down on Thursday, with international benchmark Brent crude settling down 3% at $62.33 per barrel. Analysts have stated that West Texas Intermediate settling at $60.07 could jeopardize the country’s thriving shale sector.
The ongoing trade conflict with China, the largest exporter globally, has resulted in a rise in the average US tariff on imports from that country to 134.7%, according to the Peterson Institute for International Economics.
According to a separate analysis by the Yale Budget Lab, American consumers now face an average tariff rate of 27%, the highest level since 1903 when accounting for both US tariffs and those applied against the US.
Uncertainty surrounding Trump’s trade approaches and goals is expected to “affect markets and macroeconomic forecasts in the months to come,” as mentioned by Bill Campbell, global bond portfolio manager at DoubleLine.
“Lingering uncertainty regarding tariffs will complicate business decisions regarding critical issues such as where to keep or move production facilities; cyclical matters like payroll and layoffs management; and [capital investments].”
Reported by Kate Duguid, Will Schmitt, Harriet Clarfelt, and George Steer in New York, alongside Steff Chávez and Aime Williams in Washington.
