U.S. stocks experienced a significant decline in after-hours trading following President Donald Trump's announcement of sweeping tariffs, which will start at a minimum of 10% and could be higher for specific countries. This move has escalated fears of a potential global trade war that could adversely impact the U.S. economy. The SPDR S&P 500 ETF Trust (SPY), which tracks the performance of the S&P 500 index, saw a drop of approximately 2%. Similarly, the Invesco QQQ ETF, which corresponds to the Nasdaq-100 Index, fell by 3.3%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) lost 1%.
The announcement significantly affected major importing companies. For instance, Nike shares plummeted by 6%, and General Motors suffered a 3% decline. Other stocks that had been under pressure due to ongoing tariff fears, including Nvidia and Tesla, also saw their shares drop by approximately 3% each. The tariffs are set to take effect on April 5, with a baseline rate of 10% imposed on all countries, but those that implement higher tariffs on U.S. goods will face even steeper duties.
During a press conference held in the White House Rose Garden, President Trump stated, “We will charge them approximately half of what they are and have been charging us.” He clarified that the tariffs will not be fully reciprocal, indicating that the effective tariff rate on China will be as high as 54%. Traders had anticipated a uniform 10% rate to serve as a cap; however, the announcement revealed a more complex and potentially damaging strategy.
Market analysts expressed concern over the unexpected nature of the tariff rates. Art Hogan, chief market strategist at B. Riley Wealth Management, commented on the situation, stating, “What was delivered was as haphazard as anything this administration has done to date.” The volatility in the markets has been exacerbated by heightened uncertainty surrounding Trump’s tariff announcements, which have been ongoing since February.
Despite initial optimism leading up to the announcement, stocks closed in the green earlier on Wednesday, with the S&P 500 rising 0.7% and the Dow Jones Industrial Average increasing by 235 points or 0.6%. The tech-heavy Nasdaq Composite also saw a gain of 0.9%. Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report, noted, “If he would have come in with just the 10%, I think the markets would probably be up quite a bit right now.”
The S&P 500 has faced difficulties over the past few weeks, being down for five out of the last six weeks as a result of increasing uncertainty stemming from Trump's tariff policies. This uncertainty has begun to reflect in sluggish economic data, heightening fears of a possible recession. The S&P 500 briefly dipped into correction territory on Monday, marking a 10% slide from its previous peak and recording its worst monthly percentage drop since December 2022.
Trump's earlier announcements included 25% tariffs on Canada and Mexico, and an additional 10% on China, which triggered retaliatory measures from affected countries. These tariffs are compounded by a 25% import duty on steel and aluminum, with a proposed 25% tariff on automobiles and parts set to take effect soon. Trump confirmed that previously announced tariffs on Canada and Mexico would remain unchanged.
While stocks had shown signs of recovery in the days leading up to the announcement, this latest round of tariffs is causing renewed turmoil in share prices. Jeff Kilburg from KKM Financial emphasized that while more severe tariff rates are currently shaking the market, negotiations are still ongoing. The future of the markets hangs in the balance as traders remain wary of the economic implications of these tariff policies.
