Stocks on Wall Street tumbled on Thursday, a day after the market’s biggest rally in nearly 17 years, as investors reassessed the worsening trade war with China and the White House clarified that President Trump had raised tariffs on Chinese goods to 145 percent.
Markets around the world — from stocks to government bonds to energy futures — have been battered as Mr. Trump steadily ratcheted up his campaign to raise taxes on imports of all kinds. His announcement last week that tariffs would be imposed on dozens of the United States’ trading partners set off a days-long meltdown.
The S&P 500 had rocketed higher on Wednesday afternoon, after Mr. Trump announced a 90-day pause on most of those tariffs. A tax of 10 percent on most countries would remain in place, but products from China would be tariffed at a rate of 125 percent, he said on Wednesday. Tariffs recently imposed on cars and auto parts, and steel and aluminum, would also remain in place.
On Thursday, the White House explained that the 125 percent tariff announced Wednesday was in addition to 20 percent already in place on China — which means the total levy on Chinese imports is now 145 percent.
The S&P 500, which was already lower before that clarification, fell sharply Thursday. It was down about 5 percent in early afternoon trading — giving back about half the gain from the day before.
In the government bond market, which has been flashing an alarm over the potential damage from a trade war, U.S. treasuries started to sell off again. The yield on 10-year Treasuries climbed to 4.37 percent, the highest since February. An index of the U.S. dollar’s value against other major currencies fell about 1.8 percent. The sell-off in U.S. government bonds and the dollar has caught many investors off guard, because they are typically seen as the safest corner for investors during times of turmoil.
Analysts have warned that even with a short reprieve on the global tariffs, U.S. tariffs remained much higher than before Mr. Trump took office and that trade policy was unpredictable.
“Despite the good news, policy uncertainty remains elevated and will act as a drag on the U.S. economy,” James Rossiter, the head of global macro strategy at TD Securities, wrote in a note. “Firms will struggle to plan.”
There were other signs of concern about the economic ramifications of the intensifying trade war between the United States and China. Oil prices fell about 4 percent, with Brent crude, the international benchmark, trading below $63 a barrel.
The technology-heavy Nasdaq Composite index dropped nearly 7 percent, with shares in Apple, Nvidia and other tech giants falling.
Companies have begun to warn that the trade war leaves them unable to forecast earnings and sales for the rest of the year because of the economic uncertainty.
“We are focused on growing the business, and we continue to make progress toward our long-term goals. However, we are removing the time frames associated with them given the potential impact of broader macro factors,” Carmax said. Analysts expect that the 25 percent tariffs on imported cars that went into effect last week is likely to raise car prices, lower sales and cause other disruptions to the auto industry.
On Wednesday, Delta said a lack of clarity about the economy prevented it from telling investors how much money it expected to make this year. Economists also warned that the remaining tariffs on China alone would still have enormous repercussions for the American economy.
Wendong Zhang, an assistant professor of applied economics and policy at Cornell, pointed out that “many products that the U.S. imports are predominantly from China,” including 73 percent of smartphones, 78 percent of laptops, 87 percent of video game consoles and 77 percent of toys. “Resourcing from other countries will take time and result in much higher costs,” Zhang said in an interview on Wednesday.
Wall Street’s slump on Thursday came after major benchmarks in Asia and Europe had ended the day sharply higher. In Asia on Thursday, benchmark indexes rose more than 9 percent in Taiwan and Japan and 6 percent in South Korea. In Europe, the Stoxx Europe 600 index jumped more than 5 percent. The markets in Germany and France each gained more than 5 percent.
Takahide Kiuchi, executive economist at Nomura Research Institute in Tokyo, said that Mr. Trump’s latest moves show a shift in focus from reducing America’s trade deficits to gearing up for a trade war with China.
That means “risks have not been all that significantly reduced” for many countries like Japan and South Korea, which count China and the United States as their top trading partners, Mr. Kiuchi said.
The Chinese government has taken steps to stabilize its markets. State-owned companies on Tuesday announced they were buying back some shares, a move that typically helps push stock prices higher. On Thursday, an influential state media outlet published a commentary saying it was a good time for the central bank to lower interest rates and take other steps that would support the economy.
Berry Wang contributed research from Hong Kong.
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