U.S. stock futures crashed following a dramatic announcement by President Donald Trump regarding sweeping tariffs of at least 10%, with potentially higher rates for certain countries. This development has raised fears of a global trade war that could further impact the already sluggish U.S. economy. Futures linked to the Dow Jones Industrial Average declined by 1,143 points, equivalent to a 2.7% drop, while S&P 500 futures fell by 3.9% and Nasdaq-100 futures plummeted by 4.7% during after-hours trading.
Shares of multinational corporations experienced significant losses in extended trading sessions. Notably, Nike saw a decline of 7%, and Apple dropped by 6%. Companies that heavily rely on imported goods faced some of the most severe declines; Five Below lost 11%, and Gap plunged by 12%. The tech sector was not spared either, with Nvidia down 4% and Tesla dropping by 5%, reflecting an overall risk-off sentiment among investors.
The White House announced a baseline tariff rate of 10% on all countries, set to take effect on April 5. Furthermore, higher tariffs will be implemented against nations that impose greater duties on U.S. exports. In a press conference held in the White House Rose Garden, Trump stated, "We will charge them approximately half of what they are and have been charging us." He emphasized that the tariffs will not be fully reciprocal and that the halved figure reflects the combined rates of all existing tariffs, non-monetary barriers, and various forms of economic manipulation.
Traders are likely spooked by the potential for these rates to exceed initial expectations. For instance, the effective tariff rate for China is projected to reach 54% when factoring in the new reciprocal rate alongside existing duties, as clarified by the White House to CNBC. Many traders had anticipated a tariff cap of between 10% and 20%, rather than this unexpectedly high baseline.
"What was delivered was as haphazard as anything this administration has done to date," remarked Art Hogan, chief market strategist at B. Riley Wealth Management. He added that the complexity of the new tariffs, coupled with their unexpected levels, had not yet been factored into market pricing.
The S&P 500 had seen a rise for three consecutive days prior to the announcement, fueled by hopes that Trump would refrain from implementing severe tariff measures that could potentially push the economy into a slowdown and exacerbate already persistent inflation. However, since late February, the benchmark index has experienced a significant downturn, entering correction territory with a drop of 10% from its record high. This decline has been largely attributed to the uncertainty surrounding Trump's tariff policies.
Some sluggish economic data has further intensified recession fears, leading to increased pressure on stock prices. Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report, noted, "If he [Trump] would have come in with just the 10%, I think the markets would probably be up quite a bit right now." He added that the larger-than-expected tariffs are likely to create additional downside volatility in the market.
Extrapolating the losses from after-hours trading on Wednesday, it appears that the S&P 500 is on track to fall back into correction territory during regular trading hours on Thursday, indicating a turbulent period ahead for investors.
