The stock market and the U.S. dollar both declined sharply on Thursday following President Donald Trump’s most recent global round of tariffs, which ignited fears of an impending trade war. Many experts worry this could lead to a recession and increase inflation rates.
The U.S. currency dropped by up to 2.6 percent relative to the euro, marking its most substantial intra-day decline over the past ten years. Additionally, it experienced significant depreciation against both the Japanese yen and the British pound.
In the stock market, Wall Street’s technology-focused Nasdaq Composite fell by approximately six percent, whereas the decline in the S&P 500 marked its largest single-day drop since 2020.
"Both the drop in stock prices and the depreciation of the U.S. dollar indicate significant doubts regarding investors' faith in President Trump’s trade policies," noted Fawad Razaqzada, an analyst for City Index and FOREX.com.
Stocks of clothing firms, which depend on inexpensive workforce in overseas manufacturing plants, dropped significantly; Nike declined over 11%, while Gap plummeted more than 20%.
Apple, which primarily manufactures its iPhones in China, dropped more than nine percent.
Around the world, significant declines were seen in key industries such as automotive, luxury goods, and banking.
Stellantis shares, which belong to the maker of Jeep, dropped by 7.5 percent following their announcement to halt manufacturing operations at certain facilities in Canada and Mexico due to the imposition of 25 percent auto tariffs.
The Nikkei in Tokyo experienced a brief drop of over four percent. Meanwhile, both the Paris and Frankfurt stock exchanges ended the day down by more than three percent.
Oil prices dropped by over six percent due to worries that an economic slowdown could reduce demand.
Gold, which serves as a refuge during uncertain times, reached a record high of $3,167.84 per ounce before pulling back slightly.
The returns on government bonds decreased as investors moved away from volatile investments and shifted their focus towards secure treasury securities.
- Another round of interest rate reductions? -
The anxiety arose following the announcement by the U.S. president of an onslaught of more severe tariffs targeted at nations he claimed had been "taking advantage" of the United States for many years.
The measures encompassed a 34 percent tariff on the second-largest global economy, China, a 20 percent tariff on the European Union, and a 24 percent tariff on Japan.
Several others will encounter tariffs customized to their situation, and for the remaining countries, Trump stated he would enforce a standard tariff rate of 10%, which includes the UK.
"Unsurprisingly, markets have responded negatively," observed Richard Carter, who leads fixed income research at wealth management firm Quilter.
U.S. treasury yields have dropped significantly as investors flee and seek out safe-haven assets.
This implies that the Federal Reserve might have to propose further interest rate reductions to avoid triggering a recession; however, if it encounters increasing inflation, it could find itself in a difficult position, Carter noted.
As global markets declined, Trump admitted to the impact of his tariffs, comparing it to a necessary medical "procedure," yet he asserted that the U.S. economy would come out "much stronger."
The White House press secretary, Karoline Leavitt, seemed to dismiss the idea that President Trump would retract any of the tariffs prior to their scheduled implementation over the upcoming weekend.
She stated on CNN that the president was firm yesterday about this not being a negotiation.
Nevertheless, Trump subsequently stated that he would engage in negotiations provided they offer something beneficial.
Investors are preparing for potential counteractions, yet governments have also indicated their openness to negotiations.
China pledged to implement "retaliatory measures" and encouraged Washington to revoke the tariffs, simultaneously advocating for discussions.
The European Union President, Ursula von der Leyen, stated that the union is "readying additional retaliatory actions," yet she stressed that "there is still time to alleviate these issues via discussions."
- Prominent individuals at approximately 2200 GMT -
New York - Dow: Fell 4.0 percent to close at 40,545.93.
New York - S&P 500: Fell 4.8 percent to close at 5,396.52
New York - Nasdaq Composite: Fell 6.0 percent to close at 16,550.61
Paris - CAC 40: Down 3.3% at 7,598.98 (close)
Frankfurt - DAX: Decreased by 3.0 percent to close at 21,717.39
London - FTSE 100: Down 1.6% to close at 8,474.74
Tokyo - Nikkei 225: Fell 2.8 percent to close at 34,735.93.
Hong Kong - Hang Seng Index: Down 1.5% at 22,849.81 (closing value)
Shanghai - Aggregate: DECLINED by 0.2% to end at 3,342.01 (closing).
Euro/dollar: Increased to $1.1050 from $1.0853 on Wednesday
Pound/dollar: Increased to $1.3099 from $1.3007
The dollar/yen has decreased to 145.99 yen from 149.28 yen.
Euro/pound: INCREASED to 84.34 pence from 83.44 pence
West Texas Intermediate: Down 6.6 percent at $66.95 per barrel
Brent North Sea Crude: Down 6.4 percent at $70.14 per barrel
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