Approximately $1.7 trillion vanished from the US’ S&P 500 Index when trading began on Thursday, as concerns grew that President Donald Trump’s extensive tariffs could trigger an economic recession.
Companies with overseas manufacturing dependencies suffered the most significant losses. Apple Inc., which produces most of its US-marketed devices in China, declined 8% after opening. Lululemon Athletica Inc. and Nike Inc., with manufacturing connections to Vietnam, dropped about 10%. Walmart Inc. and Dollar Tree Inc., which stock internationally sourced products, fell by 2% and 11%, respectively.
The US market experienced widespread effects, with the benchmark index facing its largest decline since 2022. By 9.35 a.m. in New York, approximately 70% of S&P 500 companies showed losses, with nearly half declining by 2% or more.
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Futures market also recorded significant losses as S&P 500 Futrues plunged 5%. Dow Jones Industrial Average futures dropped 2.8%, signalling steep losses when US markets open. Nasdaq futures fell 3.8%. Oil prices also took a hit, dropping more than 4%, and the US dollar sank to its lowest level against the Japanese yen since early October. The Dow Jones Industrial Average plunged by 1,150 points, while the Nasdaq composite fell 4.3%, according to news agency AP.
“There’s really not anybody getting spared in absolute terms,” said Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions. “You’re just wrapped up, today at least, in a broad de-risking, and so it’s kind of just across the board taking chips off the table,” he added, as reported by Bloomberg.
Also read:US, global markets plunge as Trump’s tariff hike escalate trade war fears
The scope and intensity of these tariffs exceeded Trump’s first-term measures, threatening to disrupt global supply chains, worsen economic deceleration, and increase inflation.
Citigroup analysts, led by Atif Malik, indicated that if Apple absorbed the tariff-related cost increases from China, the iPhone manufacturer’s gross margin could decrease by up to 9%.
Meanwhile, JPMorgan economist Michael Feroli noted that the plan represents the largest tax increase since 1968. It could potentially raise prices by 1.5% this year, according to the Federal Reserve’s preferred inflation measure, whilst negatively affecting personal incomes and consumer spending.
“This impact alone could take the economy perilously close to slipping into recession,” Feroli wrote. “And this is before accounting for the additional hits to gross exports and to investment spending.”
US assets emerged as primary casualties following the announcement. The S&P 500 decreased by 3%, whilst the dollar indicator declined. International markets showed less severe reactions: Asian stocks fell 0.7%, the Stoxx Europe 600 declined 2.6%, and the euro strengthened by 2% against the dollar.
The semiconductor sector also experienced significant losses. The Philadelphia Semiconductor Index dropped nearly 6%, with Nvidia Corp., Broadcom Inc., and Micron Technology Inc. declining over 5%. Caterpillar Inc. and Boeing Co., which derive substantial revenue from China, fell by at least 5%.
Apple led the decline among the Magnificent Seven stocks. This group, including Tesla, Microsoft, Nvidia, Alphabet, and Meta Platforms, had driven much of the US stock market’s growth over the previous two years.
UBS Group AG’s Bhanu Baweja wrote to clients: “We see 5,300 as the near-term target for the S&P 500, but if tariff uncertainty persists or negotiations with trading partners don’t go well, risks of downside through 5,000 become real. The probability of US stocks entering bear market is going higher.”
This comes after Trump, following the Wednesday trading session, announced a universal 10% baseline import tariff applicable to all nations, with additional levies on countries holding trade surpluses with the US. Specifically, Chinese imports will incur a 34% duty, whilst the European Union faces a 20% charge, and Taiwan encounters a 32% rate. This policy decision has significantly disrupted international markets, with China experiencing substantial impact as the new increase elevates its aggregate tariff exposure to 64%, inclusive of existing trade measures.
