Wall Street Sinks 3% After Trump Tariff Pause Bounce/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks fell sharply Thursday, erasing part of the previous day’s historic rally despite positive inflation data. Wall Street remains uneasy over President Trump’s ongoing trade war, especially with China, and the unpredictable outlook. The S&P 500 dropped 3% after a 9.5% surge Wednesday.
Markets Dip After Brief Rally: Quick Looks
- S&P 500 fell 3%, giving back gains from Wednesday’s 9.5% rally.
- The Dow dropped 981 points (2.4%), while the Nasdaq slid 3.7%.
- Inflation and jobless data beat expectations but failed to calm markets.
- Economists warn positive data reflects the past; tariffs could reignite inflation.
- Trump’s global tariff pause didn’t undo economic damage from earlier moves.
- The President maintained 125% tariffs on Chinese imports, stoking further concerns.
- Bond markets stabilized slightly, with the 10-year Treasury yield at 4.30%.
- China seeks global support against U.S. tariffs, while EU pauses retaliation for 90 days.
- Wall Street remains highly volatile amid fears of recession and shifting policies.
- Global markets rallied overnight, with Japan’s Nikkei up 9.1% and Germany’s DAX up 5.2%.
Wall Street Sinks 3% After Trump Tariff Pause Bounce
Deep Look
Wall Street suffered a steep pullback Thursday as major indexes erased a chunk of the gains made during a record-setting rally just one day earlier. Despite promising inflation and jobless claims data, investors remain rattled by uncertainty around President Donald Trump’s trade war strategy, especially with China, and the potential long-term consequences for the global economy.
The S&P 500 tumbled 3%, a sharp contrast to its dramatic 9.5% surge on Wednesday, which marked its third-best single-day performance since 1940. The Dow Jones Industrial Average shed 981 points, or 2.4%, while the Nasdaq dropped 3.7%. These declines highlight how deeply investors remain entrenched in day-to-day volatility tied to fast-moving policy shifts.
While Thursday’s inflation report beat expectations—suggesting a cooling in price growth—many economists cautioned that the data is backward-looking and does not account for the potential price pressures from existing and future tariffs. Similarly, stronger-than-expected jobless claims failed to offset the market’s anxiety.
“Trump blinks,” wrote UBS strategist Bhanu Baweja, referring to Trump’s temporary halt on many global tariffs. “But the damage isn’t all undone.” Even with the pause, Trump’s decision to hike tariffs on Chinese goods to 125% continues to cast a long shadow. Analysts warn that even scaled-back tariffs—such as a 10% baseline on other countries—could still dampen U.S. corporate profits and GDP growth.
China, facing intensified economic pressure, has begun to reach out to other nations to build a united front against the U.S. trade strategy. Meanwhile, the European Union announced a 90-day delay on its planned retaliatory tariffs, signaling interest in de-escalating trade tensions, at least temporarily.
Despite the seeming progress, Trump and Treasury Secretary Scott Bessent issued a warning: “Do not retaliate, and you will be rewarded.” This mixed messaging has left markets in limbo, unable to determine whether the worst of the trade turmoil is over—or just beginning.
The unpredictability of policy out of Washington has prompted investors to brace for continued market whiplash. The S&P 500 came within reach of a bear market last week—defined as a 20% drop from recent highs—and could revisit those levels with another round of volatility.
“Everything is still very volatile, because with Donald Trump, you don’t know what to expect,” said Francis Lun, CEO of Geo Securities.
One rare bright spot came from the bond market, where stress signals have begun to fade. The 10-year Treasury yield, which briefly spiked to nearly 4.50% earlier this week, has since cooled to 4.30%, thanks to Trump’s tariff U-turn. Just last week, the yield was at 4.01%.
The bond market has a powerful track record of influencing policy, with its historical role as a check on reckless economic decisions. In 2022, it famously contributed to the downfall of UK Prime Minister Liz Truss, and remains a closely watched gauge of investor sentiment.
Some of the earlier yield surge may have been due to forced selling by hedge funds or international investors unloading U.S. assets amid escalating trade tensions. Rising Treasury yields typically put additional pressure on stocks and push up borrowing costs for mortgages, businesses, and consumers alike.
Globally, markets appeared more optimistic—at least in the short term. With U.S. markets digesting Wednesday’s developments, international investors responded more positively. The Nikkei 225 in Japan surged 9.1%, South Korea’s Kospi jumped 6.6%, and Germany’s DAX rose 5.2% as investors welcomed the temporary pause in trade escalation.
Still, with U.S. equities back in retreat, the future of Trump’s trade policies and their economic fallout remain the most important variables in global markets. Until there’s greater clarity or a lasting agreement, volatility is likely to remain the defining feature of Wall Street’s spring.
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