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Donald Trump has defended his sweeping tariffs after the US president’s latest bid to remake the global economic order wiped out about $2.5tn of market value in Wall Street equities.
The president said on Thursday evening that he had “expected” his plans for raising tariffs to the highest level in more than a century would set off ructions in financial markets, adding that “the economy had a lot of problems . . . it was a sick patient”.
He said his tariffs would usher in “a booming economy” even as his announcement the previous day of universal levies of 10 per cent and higher tariffs on many countries shook investor confidence.
The S&P 500 tumbled 4.8 per cent on Thursday, slashing the blue-chip index’s market value by $2.48tn, according to Financial Times calculations based on FactSet data. The tech-heavy Nasdaq Composite plunged 6 per cent in its worst day since the 2020 coronavirus crisis.
The US dollar fell 1.6 per cent against a basket of rivals.
“The collapse is a loss of confidence in dollar-denominated assets in general,” said Francesco Pesole, a currency strategist at ING. “It’s a vote of no confidence on 100 days of Trump.”
As economists predicted that the new duties would stoke inflation and hit growth, US bank stocks sank on recession fears, with the sector’s KBW index down 9.9 per cent.
More than $300bn was wiped off Apple’s market capitalisation as shares in the world’s most valuable company slid 9.3 per cent, with investors bracing themselves for the impact of Trump’s tariffs on the iPhone maker’s Asian manufacturing hubs. It was Apple’s worst market cap fall on record.
Brent crude, the global oil benchmark, was down 6.7 per cent at $69.94 a barrel.
“Markets were very complacent, and now they are going into the spiral mode of trading toward a recession until they have probable cause to stop,” said Robert Tipp, PGIM’s head of global bonds.
Investors rushed into US Treasury bonds, a haven in moments of market turmoil. Shorter-dated bonds were the biggest beneficiaries, with the biggest moves in two- and three-year yields since August 2024.
Shorter-dated bonds move with interest rate expectations and Thursday’s rise in yields suggests investors are betting on more rate cuts from the Federal Reserve. Yields move inversely to price.
“There has been a massive flight to quality into Treasuries,” said Matthew Scott, head of core fixed-income and multi-asset trading at AllianceBernstein.
The moves came after Trump’s announcement on Wednesday of a levy of 10 per cent on nearly all US imports from April 5, and “reciprocal” tariffs as high as 50 per cent from April 9 on dozens of countries.
Levies on Chinese exports could rise to more than 60 per cent after the US president added 34 per cent tariffs to previously imposed duties.
Analysts said the measures could sharply reduce China’s GDP growth this year and push the world’s second-largest economy to shift from manufacturing for export towards domestic consumption.
China’s commerce ministry said on Thursday that Beijing would “resolutely take countermeasures to protect its own rights and interests”. The foreign ministry added: “It is clear that more and more countries have come to stand against the US’s tariff hikes and other unilateral bullying moves.”
Trump has argued his duties will help restore American manufacturing, encourage investment, prevent other countries from “ripping off the US” and provide trillions of dollars of revenue to finance tax cuts.
But there are signs of strain in the US. Carmaker Stellantis said it would furlough 900 workers at five plants in the US as a result of a temporary shutdown of production in Canada and Mexico in response to separate Trump-imposed tariffs of 25 per cent on foreign car imports.
Consumer-focused groups, including sportswear group Nike and electronics retailer Best Buy, were among the worst hit as worries swirled over how the latest tariffs will affect already gloomy sentiment among American households and potential damage to supply chains.
Washington’s traditional allies responded with dismay to what they depicted as an act of economic hostility, with French President Emmanuel Macron urging European companies to pause investment in the US.
“What would the message be of having major European actors investing billions of euros in the American economy at a time when they are hitting us?” he said, adding that “nothing is excluded” in terms of retaliation.
By contrast, UK Prime Minister Sir Keir Starmer told business leaders on Thursday he would redouble efforts to secure a trade deal with the US after early negotiations failed to stop Trump slapping a 10 per cent tariff on all British exports.
François Bayrou, Macron’s prime minister, said Trump’s move was “a catastrophe for the world economy . . . [and] also a catastrophe for the US and for American citizens”.
Reporting by Kate Duguid, Harriet Clarfelt and George Steer in New York, Steff Chávez in Washington and Ian Smith in London
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