After a historic rally on Wednesday, US markets reversed sharply on Thursday as reality set in around President Donald Trump’s latest trade measures. The Dow Jones Industrial Average fell more than 1,000 points, closing 2.5% lower at 39,593. The S&P 500 lost 3.5%, and the tech-heavy Nasdaq slid 4.3%—giving back a significant portion of their previous day’s record gains.
Investors had cheered Wednesday’s news of a 90-day pause on some tariffs, but sentiment soured after the White House confirmed the effective tariff rate on Chinese goods now stands at a staggering 145%. That includes a new 125% levy plus an additional 20% related to the fentanyl crisis. Some have seen this as an effective embargo on Chinese imports.
“It depends on how narrowly the tariff is applied or how broadly it’s applied, but generally if you get north of a triple-digit tariff, you are cutting off most trade,” said Erica York, the vice president of federal tax policy at the Tax Foundation’s Center for Federal Tax Policy. “There may still be some things without any substitutes that companies just have to foot the bill, but for the most part, that cuts it off.”
The sell-off was broad. Apple lost over 4%, Tesla slid 7.3%, and Nvidia and Meta dropped nearly 6% and 7% respectively. Analysts say markets are struggling to price in an unpredictable trade environment, particularly with China being singled out.
Markets digest tariff “transition” pains
While Trump left open the possibility of extending the tariff reprieve, he also acknowledged the near-term disruptions his trade policy could create, saying at a Cabinet meeting that “there will be transition problems,” but adding that the end result will be “a beautiful thing.”
Commodities and the dollar
WTI crude is trading 3.66% lower at US$60.07 a barrel.
Spot gold is trading 0.01% lower at US$3,175.87 an ounce.
One Australian dollar is buying 62.25 US cents.
Futures
SPI futures are pointing to a 116 point drop at the open.
