Trump’s massive tariffs shake markets, spark recession fears
By John Towfighi, CNN
New York (CNN) — Global markets on Thursday were severely rattled by President Donald Trump’s historic tariff announcement, which threatens to throw the US and the rest of the world into a recession.
The Dow fell 1,679 points, or 3.98%. The broader S&P 500 was down by 4.84% and the tech-heavy Nasdaq plunged 5.97%. All three major indexes posted their biggest single-day drop since 2020.
Global markets also fell sharply Thursday. Europe’s benchmark STOXX 600 index tumbled 2.57%, erasing its gains since January. Germany’s DAX index fell 3%. France’s benchmark index slumped 3.31%, its biggest single-day drop since July 2023. Italy’s benchmark index slumped 3.6%, its biggest single-day drop since March 2023.
In Asia, Japan’s Nikkei 225 index sank 2.77% and Hong Kong’s benchmark Hang Seng index fell 1.52%.
The significant declines come after Trump’s massive tariffs imposed on practically all goods coming into the United States sparked fears that the new policy could trigger significant backlash from trading partners and take down the global economy.
That’s part of the reason the US dollar fell to its weakest level since October on Thursday, wiping out its gains since Trump’s reelection in November. Tariffs in theory should boost the dollar, but investors’ concerns that the United States is creating a self-inflicted wound that would stymie its long-term growth sent the dollar sinking against other global currencies.
“They’re ignoring every rule of classic micro and macro economics. This is the policymaking equivalent of a suicide bomber,” Michael Block, market strategist at Third Seven Capital, told CNN’s Matt Egan.
Treasury bond yields fell sharply after Trump’s announcement on Wednesday and continued to slide Thursday. The yield on the 10-year Treasury note fell to 4.05% Thursday, its lowest level since October. Bond yields and prices trade in opposite directions.
Chip Hughey, managing director for fixed income at Truist Advisory Services, said investors snapped up bonds because of concerns about “the drag that the policy uncertainty plus stricter tariffs will have on growth going forward.”
Investors poured money into safe-haven assets. Gold surged to a new record Wednesday above $3,160 a troy ounce. Gold, which hovered above $3,100 a troy ounce Thursday, is up 19% this year and just posted its best quarter since 1986.
The S&P 500 closed in correction, down 12.17% from its record high in February (a correction means down more than 10% from a recent high). The Nasdaq, which has been in correction, closed down 17.96% from its record high in December. The Dow closed down 9.93% from its record high in December, approaching correction territory.
White House shrugs off market declines
White House press secretary Karoline Leavitt during a CNN interview Thursday tried to calm investors’ worries about the impact of President Donald Trump‘s decision to impose tariffs of at least 10% across all countries.
“To anyone on Wall Street this morning, I would say trust in President Trump,” Leavitt said. “This is a president who is doubling down on his proven economic formula from his first term.”
Apple shed over $310 billion in market value from market close on Wednesday to market close on Thursday, according to FactSet data.
Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, surged 39.6% on Thursday. “Extreme fear” was the sentiment driving markets, according to CNN’s Fear and Greed Index. The Fear and Greed index slumped to its lowest level this year as tariff anxiety gripped investors.
President Donald Trump shrugged off market reaction to his Wednesday tariffs announcement at the White House Thursday, telling reporters “I think it’s going very well.”
“The markets are going to boom, the stock is going to boom, the country is going to boom,” Trump said on the South Lawn. “And the rest of the world wants to see if there’s any way that they can make a deal, they’ve taken advantage of us for many many years, for many years we’ve been at the wrong side of the ball, and I tell you what, I think it’s going to be unbelievable.”
Recession fears
If Trump maintains the massive tariffs he announced Wednesday, his unprecedented trade policies will probably cause the US and global economies to both fall into a recession in 2025, JPMorgan analysts said in a note to investors.
That’s not exactly a shock: Prior to Trump’s announcement Wednesday, JPMorgan analysts gave the US economy a 40% shot of entering a recession.
JPMorgan noted that the tariffs would hike taxes on Americans by $660 billion a year — the largest tax increase in recent memory by a long shot. It will cause prices to surge, too, adding 2% to the Consumer Price Index, a measure of US inflation that has struggled to come back down to earth in recent years.
“The impact on inflation will be substantial,” the analysts said. “We view the full implementation of these policies as a substantial macro economic shock.”
The shock will be exacerbated by plunging consumer and business sentiment and by any retaliation visited upon America as foreign countries potentially impose new tariffs on the United States.
“We thus emphasize that these policies, if sustained, would likely push the US and global economy into recession this year,” the analysts said.
Oil prices plunged on Thursday on worries that Trump’s trade war will slow the world economy and that OPEC is oversupplying the market. US oil futures settled at $66.95 a barrel, marking a 6.6% tumble. It was the biggest one-day decline for crude since July 2022.
Brent crude, the world benchmark, plunged 6.4% — the biggest one-day drop since August 2022 — to finish the day at $70.14 a barrel.
OPEC+ surprised investors on Thursday by announcing that Saudi Arabia, Russia and six other members have agreed to sharply accelerate previously scheduled production increases starting in May.
Businesses brace for impact
The Business Roundtable, a powerful group of America’s leading CEOs, warned Wednesday night that Trump’s latest tariffs could backfire on their businesses.
“Universal tariffs ranging from 10-50% run the risk of causing major harm to American manufacturers, workers, families and exporters,” Business Roundtable CEO Joshua Bolten said in a statement. “Damage to the US economy will increase the longer the tariffs are in place and may be exacerbated by retaliatory measures.”
Trump’s massive new tariffs would send the US tariffs rate dramatically higher to levels unseen since around 1910, according to Fitch Ratings.
Trump’s aggressive tariff moves are set to lift the US tariffs rate from just 2.5% last year to 22%, according to Fitch.
That surpasses the roughly 20% tariff rate the United States charged following the infamous Smoot-Hawley Tariff Act of 1930, which set off a global trade war that economists say worsened the Great Depression.
“This is a game changer, not only for the US economy but for the global economy,” Olu Sonola, head of US economic research at Fitch Ratings, wrote in a statement on Wednesday.
Sonola said “many” nations will likely plunge into recession.
“You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time,” the Fitch economist said.
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