Wall Street was rocked on Thursday as US stocks plummeted to their lowest levels in months, with markets across the globe also in freefall following President Donald Trump’s announcement of sweeping new import tariffs. The S&P 500 dropped around 4% in early trading, slipping to 5,440 – its lowest point since September.
The Dow Jones Industrial Average followed suit, falling approximately 3.6%, while the tech-heavy Nasdaq bore the brunt of the turmoil, plunging nearly 5% amid investor fears over the rising cost of imported components and a looming slowdown in consumer demand.
The shockwaves were not confined to the United States. European markets were quick to react, with Germany’s DAX index tumbling 2.8% and France’s CAC 40 shedding 3.3% by mid-afternoon. In London, the FTSE 100 was down by 1.5%, slumping to a three-month low of 8,476 as traders digested the implications of a new era of economic protectionism.
The announcement from the White House, made during a dramatic press conference on Wednesday evening, outlined a new set of tariffs that will affect nearly all US imports, with the harshest measures aimed at the European Union and China. Mr Trump has argued that the move will revive domestic manufacturing, claiming it is time for the United States to “reclaim its economic independence”.
However, financial markets appear far from convinced. Investors fled to safer assets on Thursday, with bond yields dipping and the dollar taking a significant hit. The greenback slid 2.5% against the euro to a six-month low of 0.9, while also falling 1.2% against the pound, trading at 0.76 in afternoon dealings.
Economists and analysts have been quick to issue dire warnings. A note from Barclays analysts published Thursday morning cautioned that there is now a “high risk that the US economy enters a recession this year”. The bank pointed to rising inflation, falling GDP, and the increasing likelihood of stagflation – a toxic mix of stagnating growth and persistent inflation.
Should this scenario unfold, Barclays warned, large-scale layoffs could follow, sending unemployment figures climbing in the latter half of the year. The bank also noted that the effect of tariffs on global supply chains could further exacerbate existing pressures in logistics, energy, and agriculture.
Chris Beauchamp, chief market analyst at IG Group, said the move represents a major gamble for the US economy: “The key feature of the last two years and more has been the resilience of the US economy. Trump’s tariffs, along with the government job cuts and the potential for massive spending cuts, seem doomed to kill the goose that laid the golden egg.
“Of course, Trump and his team hope that their tax cuts and deregulation agenda can create a bounceback that will shock and awe the world, but the pain that has to come first is likely to be brutal for equity markets worldwide.”
Beauchamp’s comments reflect growing fears among investors that the US government is underestimating the global consequences of its actions. With central banks still navigating the aftermath of pandemic-era inflation and interest rate volatility, a fresh trade war risks undermining already fragile economic recoveries.
Traders and policymakers alike are now eyeing the next 48 hours for any sign of diplomatic engagement or reversal. In the meantime, volatility is expected to remain high as investors reassess exposure to US and global equities.
As uncertainty grips the markets and rhetoric hardens in Washington, the world’s economic order faces its most serious test in over a decade.