Wall Street Tumbles: Trump’s Tariffs Wipe Out Nearly $2 Trillion

US Markets Shaken by Fears of Economic Recession

On Thursday, the US S&P 500 Index lost approximately $1.7 trillion as concerns grew over President Donald Trump’s extensive tariffs potentially triggering an economic recession. Companies with overseas manufacturing dependencies suffered the most significant losses.

• Apple Inc., which produces most of its US-marketed devices in China, declined 8 per cent after opening.
• Lululemon Athletica Inc. and Nike Inc., with manufacturing connections to Vietnam, dropped about 10 per cent.
• Walmart Inc. and Dollar Tree Inc., which stock internationally sourced products, fell by 2 per cent and 11 per cent, respectively.

Widespread Market Impact

The US market experienced widespread effects, with the benchmark index facing its largest decline since 2022. By 9.35 am in New York, approximately 70 per cent of S&P 500 companies showed losses, with nearly half declining by 2 per cent or more.

Follow live updates on aftermath of Trump’s tariff announcements

Mid-Day Trading Declines

Later during mid-day trading, the S&P 500 experienced a significant decline of 4 per cent, surpassing losses in other primary stock markets. During its lowest point in the morning, it was heading towards its most substantial single-day decline since the Covid-19 impact in 2020.

• The Dow Jones Industrial Average registered a decrease of 1,412 points, marking loss of 3.3 per cent.
• The Nasdaq composite showed a steeper decline of 5.1 per cent.

Futures Market Losses

The futures market also recorded significant losses as S&P 500 Futures plunged 5 per cent. Dow Jones Industrial Average futures dropped 2.8 cent, signalling steep losses when US markets open. Nasdaq futures fell 3.8per cent. Oil prices also took a hit, dropping more than 4per cent, and the US dollar sank to its lowest level against the Japanese yen since early October.

“There’s really not anybody getting spared in absolute terms,” said Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions. “You’re just wrapped up, today at least, in a broad de-risking, and so it’s kind of just across the board taking chips off the table,” he added, as reported by Bloomberg.

Global Supply Chains and Economic Deceleration

The scope and intensity of these tariffs exceeded Trump’s first-term measures, threatening to disrupt global supply chains, worsen economic deceleration, and increase inflation.

Citigroup analysts, led by Atif Malik, indicated that if Apple absorbed the tariff-related cost increases from China, the iPhone manufacturer’s gross margin could decrease by up to 9per cent.

JPMorgan economist Michael Feroli noted that the plan represents the largest tax increase since 1968. It could potentially raise prices by 1.5 per cent this year, according to the Federal Reserve’s preferred inflation measure, whilst negatively affecting personal incomes and consumer spending.

“This impact alone could take the economy perilously close to slipping into recession,” Feroli wrote. “And this is before accounting for the additional hits to gross exports and to investment spending.”

US Assets and International Markets

US assets emerged as primary casualties following the announcement. The S&P 500 decreased by 3 per cent, whilst the dollar indicator declined. International markets showed less severe reactions: Asian stocks fell 0.7 per cent, the Stoxx Europe 600 declined 2.6%, and the euro strengthened by 2 per cent against the dollar.

Semiconductor Sector Losses

The semiconductor sector also experienced significant losses. The Philadelphia Semiconductor Index dropped nearly 6%, with Nvidia Corp., Broadcom Inc., and Micron Technology Inc. declining over 5 per cent. Caterpillar Inc. and Boeing Co., which derive substantial revenue from China, fell by at least 5 per cent.

Magnificent Seven Stocks Decline

Apple led the decline among the Magnificent Seven stocks. This group, including Tesla, Microsoft, Nvidia, Alphabet, and Meta Platforms, had driven much of the US stock market’s growth over the previous two years.

UBS Group AG’s Bhanu Baweja wrote to clients: “We see 5,300 as the near-term target for the S&P 500, but if tariff uncertainty persists or negotiations with trading partners don’t go well, risks of downside through 5,000 become real. The probability of US stocks entering bear market is going higher.”