A day after stocks on Wall Street saw a major rally in response to President Donald Trump's announcement he was suspending tariffs on many U.S. trade partners — excluding China — all three major indexes dropped Thursday as retaliatory Chinese tariffs went into effect.
The Dow Jones Industrial average again fell below 40,000 points (39, 593) at market close, while the S&P 500 and Nasdaq composite also saw declines of about 3.5% and 4.3%, respectively.
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President Trump on Wednesday announced a 90-day pause on "reciprocal" tariffs on nearly all U.S. trade partners while increasing duties on Chinese exports to 125%. The White House said it was because China issued retaliatory tariffs on U.S. exports rather than try and negotiate a trade deal with the Trump administration.
"Nothing's over yet," President Trump said. "But we have a tremendous amount of spirit from other countries, including China. China wants to make a deal."
Baseline 10% tariffs on all U.S. trade partners remain in place, as do 25% tariffs on steel and aluminum imports, and levies on foreign-made automobiles and parts.
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Trade experts have warned a sustained trade war between the the U.S. and China could intensify global economic effects. World Trade Organization Director-General Ngozi Okonjo-Iweala said in a Wednesday statement that such a confrontation could make global trade more fragile and lead to a reduction in global GDP.
The White House, meanwhile, has claimed tariffs are a way to boost U.S. manufacturing, raise hundreds of billions of dollars from countries that benefit from the U.S. economy, and help pay down the national debt.
