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A sharp decline on Wall Street continued on Thursday as concerns over Donald Trump’s tariffs potentially leading the US into a recession resurfaced despite the president easing off a full-scale trade war.
The S&P 500 fell by 3.5 per cent in another tumultuous trading day, reversing the previous session’s 9.5 per cent surge. The Nasdaq Composite, heavily weighted towards tech stocks, dropped by 4.3 per cent following its best performance since 2001. Meanwhile, the dollar index dropped by 1.9 per cent as investors fled US assets, causing the yen, euro, and pound to appreciate.
While there was a brief rally on Wednesday after Trump delayed imposing reciprocal tariffs on several countries for 90 days, the decision to raise tariffs on Chinese imports and maintain a universal tariff still posed a significant risk to the US economy according to Wall Street banks and investors. JPMorgan stated, “it remains difficult to see the US avoiding recession” given the ongoing trade and fiscal policy uncertainty.
Goldman Sachs echoed this sentiment, cautioning that while immediate risks may have been reduced, policy uncertainty remains high and could dampen consumer and business activity. The bond market also saw increased selling pressure, with the yield on the 10-year Treasury note rising to 4.41 per cent.
As Trump addressed the nation from the White House, Treasury Secretary Scott Bessent downplayed the market slide, stating that he did not see anything unusual. Trump expressed a willingness to negotiate with China but also warned of reinstating reciprocal tariffs if other countries did not engage in new trade deals.
China retaliated by imposing additional tariffs on US imports, while President Xi Jinping signaled a willingness to continue the trade war. The escalating tensions between the US and China also impacted oil prices, with Brent settling down 3 per cent at $62.33 a barrel.
Overall, the trade dispute between the two largest economies has led to increased tariffs on imports, raising concerns about the impact on consumers and businesses. Uncertainty surrounding Trump’s trade policies is expected to weigh on markets and economic outlooks in the coming months.
Reporting by Kate Duguid, Will Schmitt, Harriet Clarfelt, and George Steer in New York and Steff Chávez and Aime Williams in Washington