US-China Tariff War: Dow Sinks 1,700, S&P 500 Falls 5%, Nasdaq Drops 5.7%/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The S&P 500 fell 5% Thursday, erasing more than half of Wednesday’s historic rally after the White House confirmed a 145% tariff on Chinese imports. Despite promising inflation data, markets sank as trade tensions with China reignited. The Dow dropped over 1,700 points, and the Nasdaq fell 5.7%.
Markets Retreat Sharply as Trump Escalates China Tariffs: Quick Looks
- S&P 500 drops 5%, reversing much of Wednesday’s 9.5% surge.
- Dow falls 1,701 points, or 4.2%, while Nasdaq plunges 5.7%.
- Trump increases China tariffs to 145%, higher than initially stated.
- White House clarification includes previous 20% fentanyl tariff in total.
- Inflation data beats expectations, but markets focus on tariff risks.
- Warner Bros. Discovery drops 13.5% as China threatens U.S. film imports.
- Disney stock falls 7.6%, hit by China’s cultural retaliation.
- Bond yields fluctuate, with the 10-year at 4.37% after initial dip.
- EU pauses retaliatory tariffs for 90 days to allow negotiations.
- Global markets rally earlier on Trump’s temporary tariff pause.
US-China Tariff War: Dow Sinks 1,700, S&P 500 Falls 5%, Nasdaq Drops 5.7%
Deep Look
The S&P 500 tumbled 5%, slashing into its 9.5% gain from Wednesday, which had been one of its largest single-day increases since 1940. The Dow Jones Industrial Average dropped 1,701 points, or 4.2%, while the Nasdaq composite slid 5.7% in midday trading.
Markets began sliding after the White House clarified that tariffs on Chinese imports will rise to 145%, not the 125% initially cited by President Donald Trump on Truth Social. The higher number includes a previous 20% fentanyl-related tariff, raising concerns about broader economic damage.
“Trump blinks,” wrote UBS strategist Bhanu Baweja, referring to Trump’s earlier 90-day pause on global tariffs. “But the damage isn’t all undone.”
Despite a strong inflation report released Thursday morning, which showed price pressures easing more than expected, the data failed to offset growing investor anxiety over the deepening trade war. Economists noted that the inflation numbers reflected past trends, and may not account for upward price pressures that could come from the new tariffs.
Trump’s intensified focus on China, raising tariffs to levels well above 100%, has rattled investor confidence. Analysts warn that even if the tariffs were eventually negotiated down to 50%, or if only 10% tariffs remained on other nations, the economic toll could be significant, dragging down corporate profits and overall growth.
“Everything is still very volatile, because with Donald Trump, you don’t know what to expect,” said Francis Lun, CEO of Geo Securities. “The threat of recession has not faded.”
In response, China launched a new round of retaliatory measures, this time targeting U.S. media and entertainment. The China Film Administration announced plans to reduce the number of imported U.S. films, citing rising political tensions.
The market reaction was immediate: Warner Bros. Discovery’s stock plunged 13.5%, one of the biggest losers on Wall Street, due to potential setbacks for its upcoming “Minecraft Movie.” Meanwhile, Disney shares dropped 7.6%, reflecting concerns about reduced access to China’s lucrative box office market.
A spokesperson from the Chinese agency stated that American films have become “less palatable” to domestic audiences given the U.S. government’s “wanton implementation of tariffs.”
Earlier in the week, Trump and Treasury Secretary Scott Bessent had issued a warning to other countries: “Do not retaliate, and you will be rewarded.” On Thursday, the European Union agreed to pause its trade retaliation plans for 90 days, keeping the door open for negotiations.
However, Wall Street remains jittery. The S&P 500 has flirted with bear market territory—defined as a 20% drop from recent highs—and whipsaw price swings have become a near-daily feature. Despite Wednesday’s bounce, the index remains below its level before Trump’s original tariff announcement last week, dubbed “Liberation Day” by the White House.
While inflation offered a glimmer of hope, it was the bond market that provided temporary relief earlier in the day. Treasury yields, which spiked earlier this week on fears of a debt and inflation spiral, eased after Trump’s tariff pause and the inflation data.
The 10-year Treasury yield, which had climbed to nearly 4.50%, fell to 4.30% before creeping up again to 4.37% as Thursday’s stock selloff intensified. Higher yields often signal increased borrowing costs, weighing on both businesses and consumers.
The bond market has long played a watchdog role during periods of perceived fiscal mismanagement. Analysts compared the current market unease to past events like the collapse of UK Prime Minister Liz Truss’s economic agenda in 2022, driven in part by bond market rejection.
Despite Thursday’s turmoil, global markets earlier rallied in response to Trump’s initial tariff pause. Japan’s Nikkei 225 surged 9.1%, South Korea’s Kospi gained 6.6%, and Germany’s DAX added 4.5%, reflecting hope that a resolution to the global trade conflict might still be achievable.
But with the tariff rate raised to 145%, and China hardening its stance, investors are bracing for further volatility in the days ahead. If the economic blows from these trade policies deepen, the chances of a broader market correction—or even a recession—could rise.
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