Additionally, the White House has set a new baseline tariff rate of 10% on all countries. This change, which goes into effect on April 5, has set off major market turmoil and heightened investor concerns about a recession. For the new US effective tariff on goods that come in from mainland China, it will jump to 54%. Such a monumental jump would send direct shocks through stock markets in America.
Market participants had initially predicted that the 10% rate would serve as a blanket cap across the board. They did not view it as an opening bid to negotiations. While the news was historic, as a result of the announcement stock indices were mixed. Things were worse than they looked, though—the SPDR S&P 500 ETF Trust (SPY) was down roughly 2% at one point. In contrast, the Dow Jones Industrial Average increased 235 points, or 0.6%, as well as the tech-driven Nasdaq Composite up 0.9%.
The market’s reaction highlighted the uncertainty surrounding President Donald Trump’s tariffs. The S&P 500 has had a hard time lately. It’s fallen for five of the last six weeks, mostly due to the volatility caused by another major factor— Trump’s tariff tweetstorm. Art Hogan, a market strategist, commented on the situation, stating:
“What was delivered was as haphazard as anything this administration has done to date, and the level of complication on top of the ultimate level of new tariffs is worse than had been feared and not yet priced into the market.” – Art Hogan
Beyond the overall market downturn, specific companies experienced steep losses. Major corporations like General Motors and Nike had their stock prices lose 3% and 6% of their value, respectively. Companies such as RH, G-III Apparel Group, and Penske Automotive Group all suffered monumental losses. Their after-hours trading was down 23% to 25%.
Jeff Kilburg, a financial expert, noted that tariff rates have increased sharply but the fight is not yet over. He stated:
“More severe tariff rates are currently rocking share prices, but Trump is still negotiating.” – Jeff Kilburg
The rate on Chinese goods was high enough that investors reacted with alarm, and even the threat of more economic pain sent shudders through markets. Prior to the announcement, the S&P 500 closed roughly 0.7% in the green. On after-hours trading, shares began to plummet as traders began to react to the newly adjusted tariff perspective.
Larry Tentarelli noted that had Trump announced only the 10% rate without additional tariffs, market reactions may have been more favorable:
“If he would have come in with just the 10%, I think the markets would probably be up quite a bit right now.” – Larry Tentarelli
As the news unfolded, it became evident that only six stocks within the Nasdaq 100 index managed to remain in positive territory during extended trading. Faring better than the widespread losses were marquee businesses like Intuit, Paccar, Workday, CoStar, PepsiCo and MercadoLibre.
A higher-than-expected tariff rate on imports has thrown the investors into a tizzy. This step by FASB has created heightened confusion and a climate of fear among analysts themselves. President Trump defended the tariffs, asserting:
“We will charge them approximately half of what they are and have been charging us.” – Donald Trump
The imposition of these tariffs begs the question of what retaliatory action other countries may take and what additional economic damage they will bring at home.