The S&P 500, a crucial index that tracks the performance of 500 of the largest publicly traded companies in the United States, closed in correction territory on Thursday. This significant downturn was largely influenced by the unpredictable nature of Donald Trump’s trade wars, which have unsettled investors across the board. The index finished more than 10% below its peak reached on February 19, as Wall Street finds itself in the midst of a second week of market pressure.
In addition to the S&P 500, the technology-focused Nasdaq Composite also entered correction territory last Thursday. Meanwhile, the Dow Jones Industrial Average has fallen over 9% from its peak in December, reflecting widespread concerns about the sustainability of market growth amid escalating trade tensions.
The trade war intensified on Thursday as leaders from Canada and the European Union responded sharply to American tariffs imposed on steel and aluminum imports. In retaliation for a 50% EU tariff on American bourbon, President Trump threatened to impose a staggering 200% tariff on European alcohol. “This will be great for the Wine and Champagne businesses in the US,” Trump declared on his platform, Truth Social. This latest exchange exemplifies the ongoing tit-for-tat between the US and its key trading partners following the implementation of a 25% US tariff on all steel and aluminum imports.
In response to the US tariffs, Canada and the EU have enacted tariffs on American goods, totaling over $40 billion. French Foreign Trade Minister Laurent Saint-Martin stated, “We will not give in to threats,” highlighting the determination of Canadian and European leaders to resist further pressure from Trump, who has promised to impose additional tariffs as a countermeasure.
While the administration has shown a willingness to backtrack in certain situations, there have been temporary reversals of previously planned tariffs. For example, on Tuesday, Trump decided against doubling the tariff on steel and aluminum imports from Canada to 50% after Ontario’s premier ceased plans to impose tariffs on electricity exports to the US. Additionally, last week, Trump postponed the implementation of a 25% tariff on all Mexican and Canadian imports until April.
Despite the tumultuous market conditions, Trump and key members of his administration have downplayed concerns regarding the long-term effects of these tariffs on the US economy. US Treasury Secretary Scott Bessent conveyed to CNBC on Thursday that the administration is concentrating on “long-term gains in the market and long-term gains for the American people.” He remarked, “I’m not concerned about a little bit of volatility over three weeks,” indicating a broader focus on future economic stability rather than short-term fluctuations.
As uncertainty looms over Trump’s trade policies, officials at the US Federal Reserve are anticipated to maintain steady interest rates during their upcoming meeting next week. This decision is unlikely to bolster sentiment on Wall Street, where investors remain wary of the ongoing market volatility influenced by international trade disputes.
